Home Mortgage: Principles Applied, Practices, And Repayment Structure

Countless families in the United States, particularly in big cities like Dallas

, enjoy the benefit having instant homes without cash on hand through home mortgage. Home mortgage is a type of loan or financing option for purchase of a real estate. Commonly practiced in different countries around the world, the Dallas home mortgage has significantly reduced the number of homeless households. The principle applied in a home mortgage is slightly different from other types of loans in that the mortgage comes with a security interest to the lender. In fact, the mortgage itself is all but a security interest, in contrast with the general knowledge that it is a type of loan.

Mortgage has always been mistaken as a type of loan, since the procedure of obtaining it is nearly similar to that of other loans intended for purchasing expensive property. As a security interest, the role of mortgage is to secure the lender that the property will be paid in full within a set period. Normally, a home mortgage loan is set for full repayment within 10 to 30 years depending on the value of the real estate. A repayment structure will be created based on implementing legal guidelines and with the agreement of the parties involved.

When a person applies for a home mortgage from a bank, he is actually applying to obtain financing for purchasing a real estate property. Like auto loan, through which a buyer may take a car under a repayment structure suited to his financial capabilities, home mortgage allows a buyer to take the real estate property and make periodic payments. The periods of payment may vary from monthly to annually depending on the existing agreement between parties.

A regular payment consists of a capital and an interest. The capital, also called principal, is the expected periodic payment that covers the original price of the real estate, while the interest is the additional amount placed over the capital as a form of revenue to the mortgagee. This is not to be mistaken with the mortgage. Although the regular payment gives the mortgagee the security that a part of the capital is slowly being paid, it does not secure the same interest when the mortgagor (borrower) fails to pay the full amount at the end of the specified period of time for repayment.

The mortgage is actually the right of the bank or any lending institution to repossess the property and sell it to recover the loan anytime a default is met. Despite the periodic payments faithfully accomplished within this period, the property remains under the lenders ownership, thus, breaching the agreement may immediately lead to foreclosure. This leaves the borrower no choice but to pay the full amount to eradicate the mortgage and gain full ownership of the real estate.

A Dallas home mortgage often has a scheduled amortization within the set repayment period. Amortization is the process by which all repayments made over a period is accounted to reduce the value of the property. Meaning, the capital and interest paid by the buyer after sometime within a 10- or 30-year period will be deducted from the original price of the property, making it easier to pay the interest, which is eventually taken under the original annuity.

by: Genny Stutesman

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