Mortgage Loans and Housing Finance

Mortgage Loan Fundamentals

A mortgage loan is a long-term loan secured by real estate. Individuals or businesses borrow money to purchase property or raise funds for other purposes, while the lender receives a legal claim, or lien, over the property. If the borrower fails to meet the loan terms, the lender may use foreclosure or repossession to sell the property and recover the outstanding debt. Mortgage lenders are typically banks, credit unions, building societies, or other financial institutions, and mortgage loans may also be sold to investors through securitization. Mortgage loans generally involve principal, interest, a repayment term, scheduled payments, and an amortization process. The two primary types are fixed-rate mortgages, where the interest rate remains constant, and adjustable-rate mortgages, where the rate changes according to market conditions. Loan approval depends on factors such as income, employment, credit history, debt-to-income ratio, down payment, property value, and loan-to-value ratio. Mortgage insurance may be required for higher-risk loans, especially those with high loan-to-value ratios. Repayment structures, regulations, taxes, prepayment rules, and the availability of fixed or variable rates differ by country.

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Mortgage Parties and Components

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