A debt instrument which is secured by the collateral of some specified real property. The borrower is obliged by the terms to pay back the debt in a predetermined number and pattern of payments. Mortgages are commonly used by individuals and many businesses to purchase huge assets without having to pay the whole value initially. A mortgage is a long term loan which can take up to 30 years.

The mortgagor (loaner) retains the title to the mortgaged property on agreement that ownership will revert to the buyer once they have completed making payments. In most cases, the borrower’s information will appear in public records. In case of failure to repay the loan and meet other terms of the loan, the lender has the option of foreclosing it in an attempt to recover the loan balance.

Interest charged on a mortgage could be either a fixed rate or an adjustable rate. Fixed interest changes don’t change throughout the term of the loan even when interest rates go down. However, an adjustable rate mortgage (ARM) has the advantage of flexibility in case interests go down during the term of the loan.

Adjustable rate mortgages can be refinanced in a bid to reduce the term of the loan. The logic behind it is that the borrower obtains a new mortgage and then uses it to repay the existing one. There are several factors that one needs to consider before undertaking a refinancing decision including the prevailing interest rate, the term of the loan, if you need money for other uses and the length of time you intend to live in that home.

Finding an appropriate mortgage is not easy. Therefore, the potential mortgagee should conduct thorough research, consult a mortgage broker to assist you through the whole process. To determine how much one can afford for a mortgage, the use of a free online calculator could give you a rough estimate of the total amount payable and the monthly payments.

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