Mortgage

A mortgage is a way to use one's real property as a guarantee for a loan to get money. It is a type of collateral loan. Real property can be land, a house, or a building. Many people do this to buy the home they use for mortgage: the loan provides them the money to buy the house and the loan is guaranteed by the house. Mortgage closing costs are the fees paid when securing a loan, either when buying a property or refinancing. Lenders charge these fees in exchange for creating your loan. Closing costs cover things like your home appraisal and searches on your home’s title.

In a mortgage, there is a debtor and a creditor. The debtor or mortgagor is the owner of the property, while the creditor or mortgagee is the owner of the loan. When the mortgage transaction is made, the debtor gets the money with the loan, and promises to pay the loan. The creditor will receive money back with interest over time (usually in payments made each month by the debtor). If the debtor does not pay the loan, the creditor may take the mortgaged property in place of the loan. This is called foreclosure.

In the 2008 American economic failure, creditors lent money to debtors who could not pay back that money. This lowered housing prices and hurt the economy.

Types of mortgage

Simple mortgage

Defined under Section 58(b) of the Indian Transfer of Property Act as a simple mortgage is a transaction whereby ‘without delivering possession (ownership or occupancy) of the mortgaged property, the mortgagor binds himself personally to pay the mortgage money and agrees, expressly or implicitly, that in the event of his failing to pay according to his contract, the mortgagee shall have a right to cause the mortgaged property to be sold by a decree (an order of law) of the court in a suit(a case in a law court) and the proceeds of the sale to be applied so far as may be necessary in payment of the mortgage money; there is no foreclosure of the mortgaged property. Normally a mortgage is to be registered if the mortgaged money is Rs.100 or more. Mortgage deed is to be executed and appropriately stamped ad valorem with two best available witnesses.

It can be said generally when the possession of the mortgaged property is not delivered, the transaction is simple mortgage.

English mortgage

A mortgage has a product term and a mortgage term, the mortgage term is the total amount of time you will have the mortgage (typically 10 to 25 years) where the product term is how long you will be tied into a fixed rate (normally 2 to 5 years) The borrower promises to repay the borrowed money on a certain date and if it is a repayment mortgage will have cleared the mortgage in full by the end of the mortgage term. The borrower transfers the property to the lender. The lender will re transfer the property when the money is repaid when the mortgaged property is absolutely transferred to the mortgagee. The land registry holds information on who owns a property and which properties have charges outstanding on them.

English mortgage is a type of mortgage where the ownership of property is transferred to the mortgagor on a condition that the mortgagee will transfer the ownership on repayment of the loan, the title deeds are transferred to the mortgagee

Reverse mortgage

A reverse mortgage is a loan where the lender pays the monthly instalments to the borrower instead of the borrower paying the lender. The payment stream is reversed. A reverse mortgage allows people to get tax-free income from the value of their home. They are mainly to improve older people's personal and financial independence.

These arrangements are variously called reverse mortgages, lifetime mortgages or equity release mortgages (referring to home equity), depending on the country. The loans are typically not repaid until the borrowers are deceased, hence the age restriction.

Usufructuary mortgage

In this form of mortgage, the property is given as a security to the mortgagee, who is let into possession or is permitted to repay himself out of the rents and profits of such property. Following Two points should be noted carefully with respect to Usufructary mortgage, that is

(i) Possession must be given to the mortgagee, or the mortgagor must expressly or impliedly bind himself to deliver possession and

(ii) The mortgagor will not be personally liable, unless there is a distinct agreement to the contrary.

The lender takes the property. The lender receives income from the property (rent, profit, interest, etc.) until the money is paid back. The owner keeps the title deeds with him.