Mortgage loan - Financial definition
Concise definition of the term mortgage loan
A mortgage loan, or simply mortgage, is a loan secured by real estate, where the borrower agrees to repay the lender over a specified period, typically in monthly installments. If the borrower defaults, the lender can foreclose on the property to recover the loan amount.
Comprehensive definition of the term mortgage loan
A mortgage loan is a fundamental financial product used to finance the purchase of real estate, involving a legal agreement between a borrower and a lender. In this arrangement, the borrower receives funds to buy a home or other real estate property, and in return, grants the lender a lien on the property as collateral. Mortgages typically have fixed or adjustable interest rates and repayment terms that can range from 10 to 30 years.
They can be classified into various types, including conventional mortgages, FHA loans, VA loans, and jumbo loans, each with distinct eligibility requirements and terms. Market practices often involve thorough credit checks, property appraisals, and the use of mortgage brokers or financial institutions to facilitate the loan process.
Practical examples include first-time homebuyers securing a mortgage to purchase a house or homeowners refinancing an existing mortgage to take advantage of lower interest rates. Mortgages play a crucial role in the housing market, enabling individuals to own property and contributing to overall economic activity through real estate transactions.