6.Mortgage.pptx types & Benefits of Mortgages

Mortgage.pptx Benefits of Mortgages

1. Mortgages Dr.S.Jayanthi Sobhana Asst.Professor ,Department of commerce PA Sri Ramakrishna College of Arts & Science

2. A mortgage is a loan from a bank to purchase a property, with the property itself serving as collateral.  Banks issue mortgages by providing a lump sum, which the borrower repays in fixed monthly installments, including principal and interest, over a set term. If the borrower defaults, the lender can seize and sell the property to recover the loan amount.  

3. Key features Collateral :  The property being purchased is used as security for the loan, making it a lower-risk loan for the bank than an unsecured loan.  Repayment :  The loan is repaid through regular, fixed monthly payments (Equated Monthly Installments or EMIs) over a long period, often 10 to 30 years. 

4. Cost :  Interest rates are typically lower than on other types of loans because the loan is secured by property.  Process :  The mortgage process involves applying, providing documents, getting the property valued, loan approval, and disbursement.  Default :  If the borrower fails to make payments, the lender can take possession of the property and sell it to recoup the outstanding debt. 

5. Types of mortgages Fixed-rate mortgage :  The interest rate remains the same for the entire loan term, resulting in predictable monthly payments.  Adjustable-rate mortgage (ARM) :  The interest rate can change periodically based on market conditions. Initially, the rate might be lower, but it can increase over time.  Simple mortgage :  The borrower pledges the property as security but retains ownership. The lender can sell it if there is a default. 

6. Benefits of mortgages Homeownership :  Mortgages enable people to buy property without paying the entire cost upfront.  Improved credit :  On-time payments can improve the borrower's credit score over time.  Flexibility :  Borrowers can choose a repayment period that best suits their financial situation.  Lower rates :  Because they are secured by property, mortgage interest rates are typically lower than personal or unsecured loans.