Mortgages
A mortgage is essentially a way of securing a real estate loan from a financial institution using the real estate property as collateral against default on the loan. The word itself comes from the French for “death pledge”, in contrast to a “live gage”, which was the repayment of a dead using crops or livestock. The live/dead dimension referred to the fact that the loan on a property stayed in place no matter whether the land to which it was attached could successfully continue to produce crops or livestock. While the mortgage term itself refers to a legal procedure used in securing the real estate property, it has now become associated directly with the debt secured against any piece of bricks and mortar.
Mortgages are directly tied into the national appetite for home ownership. For example, in the United States and United Kingdom where home ownership is seen as a guarantee of future financial security, the mortgage markets are sophisticated and well developed. In other countries where house and apartment rentals are more common, mortgages are expensive, complicated and in many cases nonexistent.
A mortgage arrangement is the most common method of securing ownership on a property without actually paying the full amount of that property’s value in advance. Mortgage loans are offered by banks, savings and loans institutions and building societies.
Mortgage repayment can be based on fixed or floating or adjustable rate interest schedules. Other facilities include deferred interest payments, balloon payments and negative amortization mortgages. Such arrangements are made with reference to the prevailing interest rates at the time when the mortgage loans are arranged. As economies grow and shrink, interest rates will shadow those developments making mortgage loans more and less expensive over time. Part of the “mortgage game” is paying close attention to interest rate movements and making wise decisions on how and when to remortgage during the course of the real estate loan. Banks and financial institutions are in the business of making money, and money-saving opportunities will quickly be plugged, so advice from a professional financial advisor is highly recommended before any refinancing is considered.
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