Understanding the basic Homeowner Mortgage

December 1, 2015

When a person is buying a home, a new homeowner usually takes out a mortgage. A mortgage is a loan that is taken out by a borrower who is referred to as the mortgagor. The property is used as security until the debt is repaid. The lending institution is referred to as the mortgagee.

Mortgage (3) Med

The principal is the actual loan amount which the mortgagor is expected to repay along with interest, over the repayment period (amortization) of the mortgage.

A mortgage can be used for financing many different things, including:

  • Purchasing or constructing a new home
  • Purchasing an existing home
  • Refinancing to consolidate debts
  • Financing a renovation
  • Financing the purchase of other investments
  • Financing the purchase of investment property

The reason the interest is less than on a typical loan

A mortgage is a fully secured form of financing. Therefore, the interest you pay is usually less than with most other types of financing such as when you buy a car or use a credit card.

Using a Secured Line of Credit, or a fixed-rate mortgage, the interest costs are normally lower.

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