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A mortgage
loan is secured by real property through a document which gives proof of the
existence of the loan and the encumbrance of that real estate
through the granting of a mortgage which secures the loan.
A home
buyer can obtain financing to purchase a property from a
bank, either directly or indirectly through a intermediary.
Aspects of mortgage loans such as the size of the loan,
maturity of the loan, interest rate, method of paying off
the loan, and other characteristics can vary considerably.
Mortgages
have an interest rate and are scheduled to amortize over a
set period of time. The most basic arrangement would require
a fixed monthly payment over a period of ten to thirty
years. The principal component of the loan will be slowly
paid down through the making of those payments.
Lenders
provide funds against your property to earn their income.
The price at which the lender borrows money affects the cost
of borrowing.. Lenders may sell the mortgage loan to other
parties often in the form of a security. The largest firms
securitizing loans are Fannie Mac and Freddie Mac, which are
government sponsored enterprises.
The two
basic types of amortized loans are fixed rate mortgage and
adjustable rate mortgage. Combinations of fixed and floating
rate are also common, whereby a home loan will have a fixed
rate for some period, and vary after the end of that period.
In a fixed rate home mortgage, the interest rate and
the payment remains fixed for the life of the loan. In a
adjustable rate home mortgage, the interest rate is
generally fixed for a period of time, after which it will
periodically adjust up or down because it is tied to
a market index.
Some other
types of loans: Assumed, Balloon, Blanket, Bridge, Budget,
Buydown, Commercial, Endowment, Equity, Flexible, Graduated
payment, Hard money, Jumbo, Offset, Package, Participation,
Reverse, Repayment, Seasoned, Interest-only, Wraparound,
Negative, Non-conforming.
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