The mortgage is a banking product used to obtain the corresponding financing to acquire a generally real estate with the obligation to return the amount borrowed and interest in periodic instalments.
The mortgage is a bank product that often use to finance the purchase of a home.
The debtor will own the real estate while paying the corresponding amount, but if he defaults with his payment obligation, the creditor or lender will keep the mortgaged property as collateral for the loan. In other words, the property of the property guarantees the fulfilment of the obligation.
The mortgage loan formalises in a contract that establishes the debtor’s obligations and the conditions by which the loan will govern.
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The main elements that make up a mortgage and that establish in the loan contract are the following:
Amount of money borrowed that must return through instalments or periodic payments.
It is the extra percentage that must pay annually for the granting of the loan. It can be a fixed or variable interest rate—the term for returning the capital and the related interests.
The most used mortgage classification is the one that differs depending on the interest rate establish:
Fixed-Rate Mortgage Loan: The monthly payment and the loan’s interest rate do not vary throughout the term.
Variable Rate Mortgage Loan: It comprises the value of the reference index and a fixed spread. According to the reference index’s worth, the instalments’ amount update at each interest review (such as the Euribor).
Mixed-Rate Mortgage Loan: This consists of applying a fixed interest rate for a period and a variable interest rate for the rest of the term.
But there are also other classifications and various types of mortgages, such as depending on the instalments (mortgages of regular instalment), the type of real estate (mortgages for bank flats), the target audience (mortgages for young people) or their nature ( reverse mortgages ).
It comprises three essential components: the principal (the amount of money lent through a loan).
The term (the time at which the loan’s repayment agree) and the interest rate (the additional percentage the person who received the loan must repay. The interest is the lender’s profit).
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