What Is Mortgage?

Mortgage is a long-term loan designed to help the borrower purchase a house.  The home itself will serve as collateral. The mortgagor is the person borrowing money, the mortgagee is the lender of the money. There are two key components of the mortgage: principal and interest.

Principal is the amount that was borrowed or amount that is still owned and it is separate from interest.

Interest is amount that is charged by lender for the use of assets. The rate is typically calculated on annual basis and is changing constantly. Each lending institution has different rates so it is very important to shop around for the right rate.

When negotiating a mortgage, you will most likely be required to provide down payment. Down payment is the money that you are going to put towards the purchase of your home. So the amount of your mortgage will be the purchase price less the amount of downpayment.

All mortgage payments consist of two parts - one part goes towards paying the principle and the second part goes towards paying the interest. The more money you put down, the less you will have to borrow, and the less interest you will have to pay over the length of the mortgage.

If you have a down payment equivalent to 20% or more of the purchase price, you will have what is called a conventional mortgage.

If the down payment is less than 20% of the purchase price, then it is called a high ratio mortgage. A high ratio mortgage must be insured to protect the lender. This insurance is called mortgage default insurance. It protects the lender in case the borrower isn’t able to repay the loan.

The main factors determining borrower`s monthly mortgage payments are the size and term of the loan. Size is the amount of money borrowed and term is the length of time within which the loan must be fully paid back. In general, the shorter the duration of a mortgage term, the lower the interest rate, and the less it costs to borrow the money. At the end of each term, the borrower will either pay off the balance owing or renegotiate the mortgage for another term until the entire mortgage is paid back.

The process of completely paying off the loan by installments of principal and interest over a period of time is called Amortization.

Mortgage Types

Mortgage Closing Costs

Tips On Paying Off Your Mortgage Sooner

List Of Documents

Info On Mortgage Lenders  

List Of Institutional Lenders

Difficulties Paying Off The Mortgage?