What is a Mortgage?
Mortgage is a loan in which real estate is used as collateral. The borrower enters into an agreement with the lender wherein the borrower receives cash upfront then makes payments over a set time span until he pays back the lender in full. A mortgage is often referred to as home loan when its used for the purchase of a home.
What are the types of mortgage?
There are many types of mortgages available, including conventional fixed rate mortgages, which are among the most common, balloon mortgages, adjustable rate mortgages, FHA mortgage, VA mortgage. Potential homebuyers should research the right option for their needs.
Features of a Mortgage Loan
1. Simple Eligibility Criteria 2. Quick Processing 3. Affordable Mortgage Loan Interest Rates 4. Limited Documents Requirement 5. Flexible Repayment Tenors 6. High Financing
What is second mortgage?
Second mortgage is a type of subordinate mortgage made while an original mortgage is still in effect. In the event of default, the original mortgage would receive all proceeds from the liquidation of the property until it is all paid off.
What is mortgage insurance?
Mortgage insurance is a product that insures a mortgage in case the borrower defaults. Homeowners who pay a down payment of less than 20 percent are required to pay mortgage insurance. That means it is frequently an added cost to loans for lower-income people.
What Does Mortgage Insurance Do?
MIP lowers the risk to the mortgage lender by providing a safety net in case the borrower falls behind on their payments. Thanks to this added safety, FHA lenders can service riskier borrowers—those who may have smaller down payments, lower credit scores, more debts, or other blemishes on their financial record. Similar to PMI, mortgage insurance for FHA loans does not protect the borrower: the insurer’s payment goes to your lender, not you. If you default on your mortgage loan, you could lose your home.
PMI for conventional mortgages
Many lenders offer conventional mortgages with low down payment requirements — some as low as 3%. A lender likely will require you to pay for private mortgage insurance, or PMI, if your down payment is less than 20%. Before buying a home, you can use a PMI calculator to estimate the cost of PMI, which will vary according to the size of your home loan, credit score and other factors. Typically, the monthly PMI premium is included in your mortgage payment. You can ask to cancel PMI after you have over 20% equity in your home.