What is a Mortgage?
Mortgages are a very common thing in todays world but not all people know what mortgages really are and how do they work. So in this article, I will tell you what are mortgages, how they effect real estate market and few more secrets about mortgages. So what is a mortgage?
Mortgage is a contract with you and your investor (which is usually bank) about how you’re going to vouch for the loan you’ll take from that investor/bank. But that is not totally true. Mortgages are loans when you vouch for your loan with your real estate (special sort of loans), like a house or apartmenet. So for example you own a house that is $200.000 worth and you would like to buy a house for your child that is about the same value, but you only have $100.000. You can go to the bank and ask for a loan in the value of that other $100.000. But the bank won’t just give it to you. You will have to vouch for that money with something. So in that case, you can take a mortgage on your house in order to get $100.000 for your child.
Now if you can repay your debt of $100.000 in the time you’ve agreed on with your investor (let’s just call it bank from now on), then the mortgage will be gone and your kid will have a nice house. BUT if you cannot repay the debt, then you might lose YOUR house! Because this is what mortgage is all about. A protection for a bank that it will get its money back no matter what. You either repay it or it will take your house away.
You can take a mortgage on your land, weekend house or anything else. As long as it’s valuable enough that bank can use it to repay itself the money it loaned you.
Be careful when taking a mortgage because some people have lost everything they had because they could not repay their mortgage debt.
Written by: Matt
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Tagged as debt, debt management, financial debt management, house loans, loans, mortgage, what is debt, what is mortgage + Categorized as Economy articles, Finance