Mortgage Loan

Mortgage loan is the most commonly used loan type all around the world. In countries like USA, mortgage loans are the main source of Income of any Bank.

Definition: Mortgage Loan -

- A mortgage loan is a loan secured by real property through the use of a mortgage (a legal instrument). However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan.

- A loan which utilizes real estate as security or collateral. The mortgage or Deed of Trust is the agreement to pledge a home or other real estate as security.

- A loan used for the purchase of a home. The home is the collateral for the loan.

- A loan for which a specific real estate property serves as collateral to provide for repayment in case of default.

- Special type of instalment loan involving the purchase of real estate and allowing for regular payments of interest and principal. Typically, a mortgage loan involves a larger sum of money and a longer repayment period than an ordinary instalment loan.

Explanation -

A Mortgage Loan is the Best way to buy your own Dream Home. Say for Example you want to buy a house of US $ 1,00,000 than you put a 10% ($ 10,000) Down payment & take rest of $ 90,000 as a mortgage loan from a bank by putting the same home as a collateral.

So in case of if you fail to repay that loan, your bank will do the foreclosure of that property and by selling it repay your remaining loan amount with interest and giving back you remaining amount.

However, Mortgage loans are risky according to some Financial Advisors & Finance Gurus especially when you put your real estate (property) on mortgage to fund your personal needs or to convert your Credit Card Debt into a Secure mortgage loan by putting your home or property as a collateral.

Credit Card is the unsecured loan while Mortgage is the property backed loan. Banks will tell you that by taking a mortgage loan, you can convert your high interest loans into low interest loans but they will never tell you that you are converting your unsecured loans into secured asset (Property) backed loans.