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Mortgage |
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Mortgage in very simple terms is a contract in which property is used as a security for an acquirement of a loan. With the help of a mortgage individuals or businesses purchase residential or commercial real estate without the need to pay the full value immediately. This value is repaid in a period of seven to thirty years depending on the size of the loan and the prevailing practice and with an added interest. It was insurance companies that developed the idea of mortgages with hopes of acquiring ownership of property if the borrower failed to make the payments. Nowadays, it is not only insurance companies that do this but also banks and other financial institutions that have assumed the responsibility of mortgage. People all over the world are fast using the acquirement of loans in in this manner. It is becoming simpler to buy houses and land by keeping older property as a security.
There are basically two types of legal mortgage: Mortgage by demise and Mortgage by legal Charge. Mortgage by demise is an older form where the property is transferred to the creditor, the institution who has lent, from the debtor, till the amount of loan is paid. The debtor remains the legal owner of the property. In Mortgage by legal charge the creditor has
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certain rights on the property like the right to take possession over it or to sell it to enforce security.
There are various ways of repayment of loans. Self-Amortization or repayment mortgage is one where regular payments of the capital and interest are made over a set term to repay the loan, interest only repayments run on the basis of contributions made to a separate investment plan which on maturity is paid for the mortgage. Another form of paying is where the loan is paid after death by the relatives of the deceased. Here the capital and interest are added increasing the debt each year (this type of mortgage is limited to older borrowers and the retired). Repayment mortgages or partial amortization or balloon loan is when the person pays the monthly payments over a fixed period of time crossing the limit of which the person has to pay the outstanding loan at the end of the contract period.
Banks, insurance companies and financial institutions all over the world differ on matters of mortgage but basically they are guided by the same principles of mortgage. To name a few renowned banks that lend on this basis in the U.S. are ABN-AMRO Mortgage Group, American Home Mortgage, Countrywide Financial, Southern Capital Resources and many more. Asian, European and Australian finance companies are no less in number in lending to their clients.
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