A mortgage is a loan agreement that is in place for the borrower to purchase a property and pay for it over a period of time. There are now many types of mortgage available and choosing the right one for your requirements is highly important. This is because the different mortgages have different interest rates and would in turn affect the cost of your repayments. There are alternative types of mortgage where you start a new mortgage agreement but don’t actually move home, this is called a re-mortgage.
Although there are all these different mortgages the system followed and terminology stays fairly similar through out the various types of mortgage and various lenders. Some of the various terms used and the basic mortgage system that is followed are below;
Property: This is the property that is being paid for through the loan by the borrower. So because the re-payment is secured by the agreement between the lender and the borrower the property technically belongs to the borrower. There are however situation where the lender will be the actual owner of the property until the term is over and amount repaid.
Borrower: This is the person that has an ownership interest in the property and takes out a mortgage from a lender to pay for the property.
Lender: This usually refers to any company that is willing to provide mortgages for borrowers; this is normally financial institutions and banks.
Principal: This is the initial amount of the loan that was taken out by the borrower; it may also include other associated loan costs.
The basics to know about mortgage loans
Mortgage loans are usually set up and paid as a structured monthly repayment system and can stretch over a period as long as 30 years. As well as the standard re-payments there are also the interest rates added onto the cost. This is where mortgages vary with fixed rate mortgages the rate stays the same through out the term of the loan, where as with a variable rate the rate changes as the standard base rate changes. You would need to ask the lender what their rates are and then decide on the best form of mortgage for you.