A loan for which one of your properties has to be mortgaged to get the loan or it can be said that the loan amount is given to you by the bank in lieu of mortgage of a property. Appropriate interest is charged on the amount given by the bank and a period of repayment of the amount is ensured.
What is a Mortgage ?
When your property is kept with the bank in exchange for money and a loan is taken from the bank against that property. The property is kept with the bank till the amount given by the bank is returned to the bank.
In simple words, in exchange for money, the bank keeps the property with itself and when the money given by the bank and the interest on that money is returned, then the bank returns the property.
The property which is kept by itself as a bank guarantee is called a mortgage. Mortgage property is kept with the bank in the form of a guarantee which is a guarantee of getting back the money given by the bank.
What is Mortgage Loan?
When a person needs money and the person goes to the bank and applies for a loan, then the bank has mortgaged any of his assets in the bank as a guarantee from him.
The bank first calculates the value of the property to be mortgaged, after that it is ascertained whether the value of the property is more than the amount of loan required or not.
The amount of the loan is decided by the bank considering the value of the property.
Your property can be kept with the bank in the form of a mortgage or guarantee. Commercial property can be kept and property like a plot can also be kept as a mortgage.
When the mortgaged property is found to be completely correct and its value is more than the prescribed loan, then after doing the necessary paperwork, the loan amount will be transferred by the bank to the account.
Types of Mortgage loan
There are 3 types of mortgage loans in which only 3 types of property can be mortgaged, all three are explained in detail below.
- Loan Against Home
In-Home Mortgage Loan, the needy person has to mortgage his house, in return for which a loan is given by the bank to the applicant, which is called a Home Mortgage Loan.
First of all, the value of the house is calculated, after that it is seen that how much mortgage loan is needed by the applicant, then the loan amount is given by mortgaging that property.
The home mortgage loan is given to the applicant to buy a new house or to renovate the old house itself.
A time is fixed for refunding the amount given by the bank in which the amount given by the bank and the interest thereon is to be returned.
If the amount paid and the interest on the amount are not returned on time, the bank confiscates the mortgaged property.
2. Loan against Commercial Property
The loan is taken by mortgaging the commercial property with the bank and interest is charged by the bank on that loan amount, in such a situation, the commercial property remains mortgaged with the bank till the bank’s money is not returned.
The bank has full rights if the applicant does not return the amount given by the bank with interest, then the bank can withdraw its money by selling the commercial property.
It is mandatory to return the money and diameter of the bank within the stipulated time frame, otherwise, the mortgaged property is sold by the bank and withdraws its money.
3. Mortgage of land
When the needy person mortgages his land with the bank and takes the loan amount from the bank as per the need, his land is mortgaged with the bank, in return for which he is given a loan amount from the bank.
The mortgaged land can be used by the individual but till the loan amount is not returned, the bank has the right on this land and the land cannot be sold to anyone.
What is the Mortgage Interest rate
The interest rate on the loan taken against the mortgaged property is called a mortgage interest rate.
Today the interest rate of mortgage loans varies and it depends on different things like the location of the property, loan tenure, income of the applicant, these are some of the factors on which the interest rate of the loan depends.
Most mortgage loans charge interest of 10.50% to 14.50%. And one percent to two percent processing fee is also charged.
What is reserve Mortgage loan
Reserve Mortgage Loan is useful for such elderly who are unable to meet their expenses from their income, who need money but do not want to work.
Reserve mortgage loan is a good option for such people so that they do not need to ask for money in front of anyone and their living goes on smoothly.
Let’s understand Reserve Mortgage Loan with an example:-
An elderly person who has only one house of his own and no member of his family live with him, in such a situation, he is short of money in the expenses incurred in the daily routine of the elderly person.
Then the person thinks of taking a reserve mortgage loan from the bank, in such a situation, that person has to mortgage his house with the bank, but the ownership of the house belongs to that person only.
The bank first appraises the house and then decides how much loan can be given.
Installments of the loan amount are decided and credited to the Installment Account every month.
As long as the person remains alive, he gets the loan amount in the installment account in the form of pension, meanwhile, if the person dies, then if any person from his family pays his son or daughter the loan amount in full with interest. Then he gets the ownership of the house.
Even if the loan settlements which were stipulated are fulfilled and the person is alive, he can still stay in that house as long as he is alive.
Reserve Mortgage Loan is a good option for those who live alone in their old age and have no source of earning.
What is refinancing a Mortgage
In spite of having a loan against a property, taking a loan on it again is called refinancing a mortgage.
When a person has taken a loan against one of his properties and has taken some amount from the bank to take a loan against the same property again in case of need.
In such a situation, the amount received from the new loan goes to repay the old loan, the remaining money is given to the applicant, it is called refinancing a mortgage.
In refinancing mortgages, the interest rate is also low and the repayment period of the loan increases, which makes it easier to repay the loan.
What is fixed rate Mortgage?
In a fixed-rate mortgage, the interest rate is fixed, which once assured is not changed, hence it is called a fixed-rate mortgage.
As you must have seen that in other loans, the interest rate keeps changing from time to time, but in fixed-rate mortgages, it is ensured at the beginning, it continues till the end of the loan.
If the interest rate remains the same, then there is no problem in paying the loan installments, the installment which is fixed in the beginning continues till the end.
What is a Mortgage loan Underwriting?
The job of the underwriter is to find out whether the applicant who is applying for the loan will be able to return the loan amount at the right time or not, this process is called underwriting.
It is the job of the bank and the lending institution which is done by the underwriter.
How capable is the applicant in repaying the loan given by the bank or there comes a situation in which the applicant is able to repay the loan, then the bank should not face any problem in withdrawing the money from the mortgaged property?
All these documents are thoroughly reviewed and then after making sure the underwriter decides how much loan will be given to the applicant.
If the underwriter finds any deficiency in any of the documents, he will not approve the loan.
What Does a Mortgage loan Underwriter Do?
The CIBIL score or credit score of the applicant is checked by the underwriter, the loan is approved only when the civil score is good, this process is done by the underwriter.
It is also found out by the underwriter that how much more property is in the name of the applicant and how much is its value.
The full risk of the loan is seen that if the applicant cannot repay the loan, at such a time by confiscating his property, the money given to him by the bank, he will automatically recover the interest on it.
The main role of the underwriter in the approval process of a mortgage loan is to find out how much risk is there in returning the loan and if the applicant faces any problem in returning the loan, how will the bank withdraw its money.
What is a Mortgage loan Closer?
When the mortgage loan is approved, after that it is filed with the loan closure for the final step, which the loan closure looks after completely, all the papers are completely looked after by the loan closure.
The job of loan closure is to get the loan done smoothly, systematically arrange all the documents, view complete documents, check the closing statement, all these processes are done by loan closure.
After going through all the information about mortgage loans, it can be concluded that this loan is very good for those people who have a property that they can mortgage.
In this loan, interest is charged, which is decided first, after that it does not change i.e. it gets fixed.
A mortgage loan can also be returned to the bank in easy installments.
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Whatever the time limit of your loan is fixed and if you want to complete the loan before that time then you can get the loan closed.
You can use the property that is mortgaged at the time of taking your loan, only you cannot sell that property.
You should have your house, commercial property, residential property, or any land which can be mortgaged with the bank.
To take a mortgage loan, your credit score is seen, all the documents of your property are seen, your identity proof, address proof, photo ID proof, and some photos are also taken.