Introduction to Mortgage
In today’s article, we are going to talk about a very important topic related to banking and finance which is called Mortgage. In this article, we will know what is Mortgage and what is the meaning of Mortgage in financial education and banking education. So let’s start and know.
Understanding Mortgage
First of all, I would like to tell you that is basically a loan agreement which comes under the category of secured loan and this loan is given on immovable property which is related to real estate. It is a little complicated and we will understand it in simple words and with an example.
Example of Mortgage
Let’s say a businessman has land and he wants to build a building to do business on it. In this case, he needs money to build the building. Now he goes to the bank and tells the bank that he wants to start a business for which he has a land and he wants to build a building on it and he needs a loan.
Loan Agreement
Now what happens here is that the bank says that we will give you a loan but in return, we will have to take ownership of your property and land and we will give you a loan in return. So in this way, there is an agreement between the bank and the businessman. Now the bank has become a lender and the businessman has become a borrower who is taking money. So in this way, there will be an agreement between the two.
Details of the Mortgage Agreement
In that agreement, how much loan is being given by the bank, when it is being given, what are the repayment dates, how much EMI is there, how many days it has to be returned—all this information and the stamps and signatures of both become a complete agreement which comes under the category of Secured Loan Agreement and this is called a Mortgage.
What Happens If the Loan Is Not Repaid?
Now here I would like to tell you that if for any reason, the loan taken by the businessman cannot be repaid by the borrower, then the bank has the option to sell the property and the bank can recover its loan very easily.
Types of Properties for Mortgage
Friends, this loan is basically done on immovable properties. Immovable properties are those that can’t be moved. For example, if we talk about a bike, it comes under the category of a vehicle property; it can move from one place to another. But if we talk about a house property, it cannot move. If we talk about a manufacturing plant, a factory, or a farming area—these real estate-related immovable properties are given a mortgage and for this, a mortgage is made.
Old vs. New Mortgage
A mortgage can be created for an old loan with the bank and if someone wants to take a new loan, a mortgage can be made there. Friends, I would like to tell you that the person who takes out a loan in this is called a mortgagor and the person who gives a loan to the bank or any financial institution is called a mortgagee.
Repayment of Mortgage Loan
The money that the mortgagor pays is the interest and principal amount i.e. the loan taken and the interest that has been paid. When he combines the money and repays it, then that money is called mortgage money.
Conclusion
So friends, this is a small concept in which I told you what a mortgage is and why it is made.