Real Estate Loan – Understanding the Concept

By: DonaldJennings

Real estate loan (also known as Mortgage) is a concept that centers on borrowing money from financial institutions to purchase a home. People visit financial institutions for a mortgage to finance their choice property while they make an initial deposit for the home, based on its value. An installmental arrangement is worked out between the parties involved in the loan. Usually a monthly / periodic payment is expected from the borrower based on an agreed interest between the financier and the buyer of the property.

The interest rates could be fixed or negotiated for a full tenure loan. The tenure of mortgage and the prevailing market rate determines the amount of interest you pay for your property loan or mortgage as it is also called. Your down-payment can be reduced depending on which medium you are getting the money. If it is through Federal Housing Authority (FHA) and Valuation Authority (VA) loans, your mortgage could be reduce to 5% as down-payment.

There are also additional costs that are related to the loan such as inspection cost, closing cost, attorney fee, stamp duty e.t.c. It is advisable that you take time out to understand the concept of real estate loan and its associated costs clearly before going for the mortgage. It is an easy to understand concept. One delightful aspect of Mortgage is that a lot of people now own their homes through this concept.

Mortgage as financial instrument has brought happiness to people by making unaffordable homes affordable. Also, property investors uses mortgage for purchasing properties. Real estate loan is not free money and whoever purchase property or has plan to finance property using mortgage must clearly understand the concept of real estate loan.