Mortgage Loans

The most popular way to finance a house or property is with a mortgage loan. A mortgage loan is facilitated when you (as the potential home buyer) sign a legal document that pledges a property or house to the lender (usually a bank or financial institution) as security for payment of a debt.

In effect, the bank or financial institution will lay partial claim on your house or property until you have paid off your mortgage loan.

Failure to make payments can result in the foreclosure of the mortgage. Foreclosure allows the lender to declare that the entire mortgage debt is due and must be paid immediately.

If you do not pay your debt in accordance with the contract that you have with your lender, the lender can take you to court and this can result in the lender taking possession of your property. The property will then likely be sold to pay off your debt.

A mortgage loan is usually paid off in installments. The person who takes out the mortgage will have to pay off the amount borrowed plus interest.

Usually people choose either a 15-year or 30-year mortgage. A 15-year mortgage can require higher monthly payments but it also allows your equity (your financial claim to your property) to accumulate more quickly. Equity is the difference between the market value of your home and the amount still owed on your home’s mortgage. If the market value of your home is $150,000 and your mortgage balance is $100,000, your equity is $50,000.

A 30-year mortgage loan requires lower monthly payments than a 15-year mortgage, but ultimately you will end up paying more for this loan in the long run as interest accumulates. It will also take longer with a 30-year mortgage loan to accumulate equity on your home. The 30-year mortgage can be a good option for people who do not have a lot of money or for people who want to invest in a large house or property that they can pay off over time.