Mortgage Loans

What are Mortgage Loans?

Mortgage Loans are loans that are secured against a property or an area of land that has been purchased by a bank or another financial institution on behalf of an individual or a group of people. The mortgage loan will be made out to those who have purchased the property and monthly payments will have to be made until the loan has been paid off.

The bank or institution has the right to repossess the property if payments are not made on the mortgage, but in the meantime the property is in the name or names of the people who have taken the loan out.

Types of Mortgage Loans

There are many different types of mortgage loans and each loan depends on individual circumstances.

On the whole there are four different types of mortgage:

  • Fixed rate mortgage, which means the months’ payments are unlikely to change for an agreed number of years.
  • Adjustable rate mortgage. These mortgages are also known as ‘Variable rate mortgages’ or ‘Floating rate mortgages’.
  • Prepayment mortgage .These mortgages restrict how much can be paid back. There is often a fee if the borrowers want to pay the sum off in part or in full.
  • No capital mortgage. These mortgages are usually lent to senior citizens and no interest is paid, instead the monthly payment is taken from the amount owed.
  • Interest and partial capital mortgage. These mortgages are often known as ‘Balloon loans’ and require a specific payment to be made over an agreed period of time. At some stage that is likely to be close to the end of the agreed time, the rest of the loan will need to be paid.

Within these mortgage loans there can also be many different factors that determine how much is paid per month and the conditions of the mortgage in general. These different factors include:

  • The size of the mortgage loan
  • The rate of interest
  • The applicants credit history
  • How much money needs to be paid each month
  • Whether the interest will remain the same through-out the life of the mortgage
  • The length of time the loan needs to be paid off

Who Needs Mortgage Loans?

Those who wish to invest in a property or land but do not have the means to pay the full price for the property will try to apply for a mortgage loan. Many people think about applying for mortgage loans when they are trying to find a new home or they want to open a business. The majority of people are unable to pay outright for the property and will instead look to a bank or another financial institution for help. Others may have already purchased a home and paid off the mortgage and wish to buy a second home so they can take a vacation or to lease.

Millions of people around the world think about mortgage loans every year and are successful in their mortgage loan application. Mortgage loans help people buy their first or second home, start up a business or buy a plot of land and secure their financial future.

Benefits of Mortgage Loans

There are many benefits to mortgage loans other than simply owning the property once the loan has been paid off. These benefits include:

  • Leverage. This occurs when the value of the property increases during the loan period. This will not affect the mortgage loan repayment, and it can work in the borrowers favor if they wish to sell the property before the loan is paid off.
  • Tax deductions. If you have to pay back interest to the value of $30,000 a year on your mortgage loan, you may receive a deduction of up to $8,400 if you’re in the 28% tax bracket.
  • Security. You not have the security of having your own home or building, but the insurance that covers the property. This insurance will more than likely pay for a wide variety of damages that occur as a result of natural disasters and other incidences that may affect your home.

Applying For A Mortgage Loan

Applying for a mortgage loan is a long process that could take months, but the hard work will pay off when you get the keys to your own home or business. While it may be tempting to jump at the first mortgage you find, you should explore a variety of mortgage loans so you take out the right one. Before you apply for a mortgage loan, make sure you know what the repayments are and if you can realistically afford them. Speak to a financial advisor who will help make the whole process easier for you to understand and easier for your wallet. Mortgage loans are more than that; they perk up your financial state as well. How? Loan repayment installments are tax-deductible. Therefore, you can earn a concession from your ordinary taxes. Mortgage loans are indeed the best tax-saving option.