In these hard times, financial assistance is needed and sought by many in order to cope up with one’s needs to survive. Owning a residence is one of these needs. For this, a couple or family would need a large sum of money to aid for the construction of a shelter. However, not all could afford this.
A mortgage is what people consider in needing financial assistance in building a home or an establishment. Couples or individuals who want to own a house files a mortgage loan for financial backup. Certain agreements are made with a financial company such as a bank in order for the loan to be approved. This type of loan is also known as home loan.
Furthermore, companies also need financial support in constructing business establishments such as a offices, shops and apartments. This, on the other hand, is called commercial loan. Also, an agreement is made and should be fulfilled between the party making the loan and the financing company.
The Mortgage Loan Process:
Mortgage note should be furnished by the borrowing party which serves as a proof of the existence of a binding agreement with a financing company. This also includes the conditions stated by the one granting the mortgage or loan such as the tax to be paid.
The loan is then approved. The borrowing party should pay the company as agreed, both the principal money and the tax or interest.
The property serves as security for the borrowed amount. If ever the party that filed the loan failed to fulfill the conditions stated in the mortgage note, the financing company has the right to get the rights over the property.
The Elements of a loan
- Property- the project or structure to be financed for which a loan is made.
- Mortgage- the conditions cited by the lender for the borrowing party to abide with such as in selling the property in the future.
- The Borrowing Party- the person or group of persons filing a loan for ownership of a property.
- The Lending Party- the agency or company that grants the loan with a binding agreement that both have to fulfill (commonly, a bank)
- The Mortgage Broker- a person or agent that finds the best mortgage for the borrower and is not the lender himself
- Principal- the amount borrowed and should be paid by the borrower
- Interest- It is the amount paid for the lending party for borrowing the money it had provided for the loan
- The amount requested- this is the amount of money requested by the borrowing party, which the financing company approves
- Loan maturity- It is the given time the loan needs to be paid
- Rate of Interest- It is the percentage of the whole amount that should be paid based on the agreement aside from the principal amount.
- Mode of payment- the conditions of paying the loan
In cases like the borrower fails to bind with the contract specified by the company, the later could get hold of the property. It gets the rights of ownership to the said property financed by the loan.