Mortgage Essay

Topics: Mortgage, Mortgage loan, Debt Pages: 4 (1517 words) Published: January 7, 2014
Mortgage is the charging of real or personal property by a debtor to a creditor as security for a debt on the condition that it shall be returned on payment of the debt within a certain period. It is when someone wants to borrow money (a borrower) goes to a bank, thrift, independent mortgage broker, online lender or even their property seller and obtains a long term mortgage loan. The way that this works is the property that the person mortgages, usually their house or sometimes their land, serves as collateral for the loan. The person getting the mortgage signs papers like a contract that gives the lender the right to keep the property until the agreed debt is paid. If the borrower doesn’t make his or her payments as they agreed then the lender is able to take the property through foreclosure. Foreclosure is a legal process in which the lender tries to recover the balance of the loan in which the borrower failed to pay. When the contract is followed a monthly mortgage payment is called a PITI statement. It is called this because it covers a portion of the following four costs: Principal, Interest, real estate Taxes, and property Insurance. Principal is the original loan balance and interest is the percentage of the principal owed. Borrowers have a choice to pay their real estate taxes and insurance in lump sums when they come due rather than in monthly installments onto their contract accounts. They can also choose to get Private Mortgage Insurance (PMI) or government-backed mortgage insurance premiums.

The breakdown of each payment (amount going toward principal, interest, etc…) changes over time because mortgages are based on a repayment formula called amortization. Amortization is a term meaning the lender spreads the interest you owe on the mortgage over hundreds of payments so it’s overall affordable. In the start of the payments the amount going toward interest is a lot higher than in the ending payments and it is opposite with the amount going...

Citations: https://www.google.com/
http://www.bankrate.com/brm/news/real-estate/buyerguide2004/mortgage-keys.asp
Timiraos, Nick; Alan Zibel (2011-11-02). "Reviews Begin for Borrowers Disputing Foreclosures". Wall Street Journal. Retrieved 2012-01-17
http://www.homeloanlearningcenter.com/mortgagebasics/aboutinterestrates.htm
http://banking.about.com/od/mortgages/a/mortgagecrisis.htm
http://www.investopedia.com/financial-edge/1110/5-consequences-of-the-mortgage-crisis.aspx
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