Mortgage

What is Mortgage?

A mortgage is a loan granted by a lender to a borrower to finance the purchase of a property. Mortgage loans are often used to cover the cost of buying large-ticket items such as cars or real estate. Mortgages come with an interest rate that can vary depending on the borrower's credit score and financial standing.

Types of Mortages

There are three main types of mortgages available to potential home owners:

1. Fixed-Rate Mortgages: Offer stability as they feature an interest rate that remains consistent throughout the life of the loan, providing borrowers with predictable monthly payments.

2. Adjustable-Rate Mortgages: ARM feature an interest rate that periodically changes in response to market conditions, potentially leading to lower payments for the borrower over the short term but larger payments in later years.

3. Reverse Mortgages: Allow senior homeowners to access their home's equity with no repayment due on the loan until after the homeowner leaves the property or passes away. These mortgages provide a beneficial option for older homeowners who have limited income or have experienced drastic decreases in their retirement savings due to economic uncertainty.

Mortgage vs loan

Element	Loan	Mortgage Loan
Purpose	Typically for short-term needs	Primarily for purchasing property
Interest Rates	Loans offer High Interest rate	Interest rate is Low in mortgage loans
Paperwork	Involves less paperwork	Requires more extensive documentation
Financing Type	Often used as bridge financing	Long-term financing
Term Length	Shorter duration	Longer duration
Collateral	Generally unsecured	Secured by property (e.g., car, house)