Mortgage: your choice for a new home?
If at this point in your life you are considering buying a home but don’t know what it entails, this article is what you were looking for.
Here we’ll tell you the important points you need to know about mortgages and how people use them as their only option for buying a new home.
In this text, you’ll learn about the institutions that offer these types of products, the requirements for applying for them, the types of mortgages that exist, and the elements that make them up.
The best thing is that you will discover everything about mortgages, so that you can evaluate whether this is really the right option for you or whether you need another option.
What is a mortgage?
In its most exact definition, the word mortgage refers to a right that encumbers real estate to guarantee the fulfillment of an obligation or the payment of a debt.
This definition also refers to the amount of money that constitutes that debt.
Because they work, mortgages are used to buy a new home or to borrow money on the value of a home you already own.
Mortgages are usually applied to real estate such as houses or land, but it is also possible to create a mortgage on personal property such as vehicles or works of art.
So, for example, a person can make a mortgage contract on his or her home without having to leave it to the creditor.
However, the mortgage guarantee must always be taken into account before signing any document.
What is a mortgage guarantee?
It is the right granted on a property to an institution with which a debt is contracted, since in case the debt is not paid, the person who gave the money in loan can become the owner of the property to sell it and recover the money.
Basic elements of a mortgage contract
Now we are going to tell you the basic elements that a mortgage has and that you must know to have very clear how it works:
- Capital, which is the total amount of resources you lend to the debtor. Generally, the capital loaned is less than the value of the property left as collateral in the mortgage.
- Then we have the interest rate, which implies a charge of a fixed or variable percentage on the debt.
- The term, indicates the time in which you are expected to pay back the money you borrowed.
- The debtor is the person who receives the money from the mortgage.
- The creditor is a bank or credit institution that lends the money to the debtor.
Important points to check on a mortgage
- The amount of the loan.
- The interest rate and associated points.
- Additional costs including insurance, fees, etc.
- The type of interest rate that can be fixed or variable.
- The term of the loan, or how long you have to repay it.
- Whether the loan has other risk points, such as prepayment penalties, final balloon payment clause, among others.
Look at all your options to find a mortgage that you can afford even with all your priorities in mind.
What are mortgage contracts used for?
Mortgage contracts are generally used to obtain long-term financing and for a significant amount of resources that would otherwise be difficult to obtain.
The mortgage has the great advantage that the debtor does not have to give up the property as collateral and can continue to enjoy it.
Is a mortgage the same as a home loan?
It is not the same, since the mortgage credit is a contract by which an amount of money is given, which has to be returned in the terms and conditions agreed upon, among which is the payment of an interest.
The mortgage is the guarantee that assures the returns of the amounts given as a loan.
What does it mean to mortgage your home?
When a person finds himself in the need to mortgage his home, it is usually to solve a problem related to lack of liquidity or because he needs to solve a problem that had not been taken into account.
The mortgage loan allows access to a significant amount of money, as long as the person who requests it puts as a guarantee a property, which can be his or her home.
It is highly important for those who apply for and obtain a mortgage, to comply with the payments on time, to fulfill the commitment agreed with the institution that provided this resource.
Otherwise, that is, if the person who obtained the mortgage does not comply with its payment obligation, the bank can execute it and keep the house.
Now that you know the meaning of mortgaging your home, it is important that you know the types of mortgages that exist in the market.