Definition of "Mortgage loan"

A mortgage loan is nothing more than a real estate debt instrument. Acquiring a mortgage loan is the most common method of financing a home in America. The benefits are tremendous and the availability of it is dictated both by the risk the borrower presents to the lender, and the present moment of the country’s economy.

Here’s the play-by-play to better visualize the whole idea of a mortgage loan:

Jerry wants to buy a house that costs $200,000. But he doesn’t have 200k to spend at once - or he does but spending that amount of money will damage his cash flow. Because he doesn’t want to have a house but live miserably – plus, every new house comes with hidden costs…- he goes to a mortgage lender to ask for a mortgage loan.

The lender checks Jerry’s credit score and puts it against the price of the house to figure out if they are willing to take the risk on Jerry’s dream and financial health. If they are, then the mortgage loan is on. They will pay the $200,000 directly to the home seller and sign a contract with Jerry to allow him to move the home, that is “jointly owned” by the bank and Jerry. Now, every month, Jerry has to pay a certain amount of money combined with a specified (and agreed by contract) amount of interest that is deducted from the total amount. With every payment, Jerry acquires more equity to the home.

If everything goes along smoothly, Jerry pays the mortgage loan in its entirety, erases his debt, and the house becomes 100% his, thank you very much mortgage lender bye-bye.

However, if it doesn’t… big problems ahead.

A mortgage loan basically means that, as collateral, is the house itself. If something happens and Jerry defaults too much and fails to terminate his debt in a timely manner, the house goes in foreclosure and heads to auction so the lender can return its investment, and Jerry – having paid from 1% to 99%; doesn’t matter – loses everything.

Real Estate tip:

Here’s a great sort of mortgage loan: we will give you the best local real estate agents and you’ll give us… well, nothing because The OFFICIAL Real Estate Agent Directory® is 100% FREE! So I guess it’s not a mortgage loan after all, right? It’s just amazing. Yeah, we think so too. Enjoy!

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Self-employed contractor who may perform work on a structure such as residential or commercial property. ...

Type of ownership by husband and wife, recognized in 27 states, in which the rights of the deceased spouse pass to the survivor. It is the same as joint tenancy, except that one spouse ...

Descriptive of the architectural development of property in a certain area. For example, a housing subdivision may use very similar building architecture throughout the development. All the ...

English-style home. It is usually 2-stories high. The roof is of a hip type. The chimney is on the side of the home. ...

The economic indicators that trail behind aggregate economic activity. Six lagging indicators issued by the government consisting of unemployment rate, corporate expenditures, labor cost ...

Federal agency within the Department of Housing and Urban Development that provides financing to home buyers, particularly those with little cash or with a need to lower monthly payments. ...

An easement granted to a public utility. ...

Same as term contract of sale: Written agreement between a seller and a buyer in which the latter agrees to buy real estate property upon mutually suitable terms. ...

An attic is an accessible room or space between the roof rafters and ceiling joists of a structure. The attic can be completely finished as a habitable place, complete with floors, ...

Popular Real Estate Questions