When a person purchases a property they will most often take out a mortgage. This means that a purchaser will borrow money, a mortgage loan, and use the property as collateral. The purchaser will contact a Mortgage Broker or Agent who is employed by a Mortgage Brokerage. A Mortgage Broker or Agent will find a lender willing to lend the mortgage loan to the purchaser. tailor made financial services
The lender of the mortgage loan is often an institution such as a bank, credit union, trust company, caisse populaire, finance company, insurance company or pension fund. Private individuals occasionally lend money to borrowers for mortgages. The lender of a mortgage will receive monthly interest payments and will keep a lien on the property as security that the loan will be repaid. The borrower will receive the mortgage loan and use the money to purchase the property and receive ownership rights to the property. When the mortgage is paid in full, the lien is removed. If the borrower fails to repay the mortgage the lender may take possession of the property.
Mortgage payments are blended to include the amount borrowed (the principal) and the charge for borrowing the money (the interest). How much interest a borrower pays depends on three things: how much is being borrowed; the interest rate on the mortgage; and the amortization period or the length of time the borrower takes to pay back the mortgage.
The length of an amortization period depends on how much the borrower can afford to pay each month. The borrower will pay less in interest if the amortization rate is shorter. A typical amortization period lasts 25 years and can be changed when the mortgage is renewed. Most borrowers choose to renew their mortgage every five years.
Mortgages are repaid on a regular schedule and are usually “level”, or identical, with each payment. Most borrowers choose to make monthly payments, however some choose to make weekly or bimonthly payments. Sometimes mortgage payments include property taxes which are forwarded to the municipality on the borrower’s behalf by the company collecting payments. This can be arranged during initial mortgage negotiations.
In conventional mortgage situations, the down payment on a home is at least 20% of the purchase price, with the mortgage not exceeding 80% of the home’s appraised value.