Mortgage is derived from two words: mort. which means dead and gage. which means guarantee. According to one dictionary definition, a mortgage is the act of transferring interest in a property as a guarantee for money borrowed. In short, you borrow money and place your home as a security for it.
Lenders (usually banks) want to loan out funds, because they are profiting from financing others (people or companies). But lending is risky business, so lenders will have to take all the necessary precautions to insure that they recover their funds (called principal) and also get their interest (their actual income).
Come to think of it, the world of finance is pretty much based on math, in which players need to predict as accurately as possible the outcome of everybody’s actions. There is always risk involved, but even that can be calculated and, thus, minimized. That’s what statistics and probabilities are for.
The interest mentioned in the context of loans is quite tightly related to the principal through what is called the interest rate. This is nothing more than the percentage of the principal which is repaid by the borrower over a period of time, such as each month.
So far so good, but when you check out a commercial offer that lists different mortgage deals. you will notice there are quite a few parameters to choose from. To begin with, it’s the currency of the loan. If your national currency if doing good and is stable or is even
appreciating against other currencies, perhaps a foreign currency loan is best for you (at least it seems so at the time). If the opposite is true, then it is better to take a loan in your national currency.
Rates For The 100 Mortgage
Furthermore, the interest rate can be fixed or variable. Fixed rates will be usually quite high, but can offer significant protection to borrowers against future economic downturn. Variable rates will be better for the good times. In real life, mortgage contracts cover a long time (30 years, for instance). Things usually do change and, often, borrowers will seek advice as how to best refinance their loans, perhaps to reduce their monthly payments.
Lender Requirements For The 100 Mortgage
Usually, the lender will require that the borrower to also pitch in with some money for the initial property purchase (from the building company). This smaller amount is called down payment and can be as high as 20% of the current value of the property. For a $100,000 house, that’s $20,000. When paid in one shot, it can be quite a bit, effectively preventing some people from taking mortgage loans to begin with. In very good times, this costs lenders in business lost, so they tend to lower their down payment requirements, just to get customers. This lowering can go so far as to cancel it altogether. This is called a hundred percent financing. and the mortgage is called 100 percent mortgage or, in short, 100 mortgage .