Mortgage 101
A mortgage is a generic term for a loan which is secured by property. Similar
to other loans, there is an interest rate and a set date at which it will amortize. Typically,
mortgages run for 30 years. All property has the potential to be mortgaged. The interest rate
is determined by the lender's risk.
In most countries, mortgage lending is a means which one can hold private ownership of
residential property. Governments regulate many aspects of lending by establishing legal
requirements and financial markets. In addition, the market can be controlled by regional and
historic factors.
Mortgage loans are intended to be long-term and have periodic payments. The most basic mortgages
entail fixed monthly payments for ten to thirty years. By working with this arrangement, the
loan is slowly paid off.
Lenders provide funds against the property in order to gain income through interest payments.
It is common for the lender to borrow the funds used, and therefore, the cost of borrowing is
affected by this charge. In the United States, the largest firms securitizing loans are Fannie Mae
and Freddie Mac. Both of these are sponsored by the government.
The riskiness of the loan, which is a function of the creditworthiness of the borrower, is
accounted for in the interest rate. Those with poor credit often have difficulties obtaining
standard banking mortgages. However, they most likely will qualify for hard money lending.
For more information on hard money lending, contact the Pitbull Mortgage School today
by dialing 858-736-7788.
