A Mortgage Loan In Laymen's Terms
A mortgage loan, in its most basic interpretation
, is money loaned to persons who are trying to purchase property. This loan, after granted, must then be paid back to the bank or mortgage lender plus the interest that is accrued. The payments are made over a span of time agreed upon by the lender and borrower. The amount of time to pay back the loan can vary but normally takes several decades.
There is a lot of legal terminology used in explaining the specifics of a mortgage loan. For example, the loan is secured through a mortgage note. A mortgage note is a promissory note that states the total debt and interest amount to be repaid by the borrower. Basically, this means it is a legally binding promise written on paper that states the borrower will pay back the mortgage loan, plus interest, in the specified amount of time.
Another term that is coupled with mortgage loans is the word encumbrance. An encumbrance is the technical or legal term for that which affects and/or limits the purchased property's title such as the aforementioned mortgage. Think of when you purchase a car. In order to show ownership of the vehicle, you must obtain the title. The title is a piece of paper that states you are the owner of the vehicle. So, an encumbrance is something that affects the borrower's proof of ownership of their purchased property. The title is affected or limited because the borrower has yet to pay for the property in full.
A mortgage loan is something the majority of property owners must have. It is extremely difficult to buy property outright because few people have enough money saved to do so. A mortgage loan does not have to be a hassle. As long as borrowers are smart about the mortgage loans they agree to, they should be prepared enough to afford the payments they are required to make.
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By: Tikee Pittman
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