The word ‘mortgage – in financial lingo or even in colloquial term – refers to mortgage loan. The loan is secured by a real estate property. The evidence of the transaction is made through a mortgage note. The details of agreement are done in writing and the property owners retain the title as long as they live in the house.
The mortgage loan is not an option for all and sundry. Only those who are in their twilight years can apply for such loans to ensure happy going till their last breath. Followings are some basic guidelines as followed by the mortgage companies while disbursing loans to the potential borrowers:
- The prospective borrower must be at least 62 years old. Most of the companies follow this minimum age limit while a few lowers the lever further to 58 years. There is no upper age limit for receiving mortgage funding.
- The lenders approve loan against residential or commercial property. Depending on the type of property in use, mortgage financing is divided into two categories – residential mortgage and commercial mortgage.
- The condition of your property is one of the primer considerations for the lenders. Good maintenance means your property is in mint condition and that helps you earn a favor from the loan providers.
- The lenders also check your credit points before fund disbursement. If it is not up to the mark (620 is minimum level for acceptance), then conventional mortgage is a distant dream. However, the door of obtaining subprime mortgage is still open for those with poor credit point.
- Getting mortgage loans does not mean giving up ownership title. You are very much allowed to live in the same house or do business in the same commercial set-up as long as the youngest homeowner is alive.
Regulation of mortgage funding
As mortgage loan is taken out against a residential or commercial establishment, so it puts encumbrance on the legal right of the borrower to his property. Mortgage loan principal gets inflated over time due to addition of interest rate. There is a scheduled time period of amortization just like other types of loan. The size of interest rate reflects the amount of risk involved in loan transaction.
Generic structure of mortgage funding
Mortgage loan is widely used as the common vehicle to fund a project and ensure financial support for the old homeowners through the use of equities. With time, equities increase in value. The basic working principle of mortgage loan is to utilize these idle but convertible assets into hard cash.
The terms, regulations and other formalities may differ from one country to another but the basic structure of mortgage loan remains the same throughout the globe. Mortgage loan is structured as a long-term funding and repayment is made through series of periodic installments. In most of the cases, a fixed monthly pay-off is made for a long time, say 10-30 years. However, mode of payment varies and several options are available to make a choice from.