First of all, what is a mortgage? A mortgage is promising of a piece of property to a lender as collateral for a mortgage loan. Be careful to note, however, that a mortgage is not a loan. It is a proof of a loan. Through mortgages, individuals and businesses are able to afford acquisition of real estate without having to pay for the full value of the property immediately.
In a mortgage, simply put, the ownership of a piece of land or property is transferred to the lender in the interim of the loan period. Once the agreed payment schedules are fulfilled and the loan is completely paid for, the ownership is returned to the 'true' owner.
In countries like Spain, UK and the United States, home ownership is commonly funded by residential mortgages.
Residential Mortgages differ from commercial mortgages. Among the basic differences are:
Type of collateral. In residential mortgages, the real estate collateral is a residential property, not a business real estate.
Borrower's profile. Private individuals are the prime borrowers utilizing residential mortgages, not corporations, partnerships or limited companies.
Interest rates. Residential mortgages enjoy lower interest rates than commercial mortgages. Options on fixed rates mortgages or adjustable rate mortgages are both available in residential and commercial mortgages.
Generally, the requirements to get a residential mortgage are similar to those that are required for commercial mortgage. However, depending on the purpose of the mortgage, some variations may be present.
For better understanding, let's walk through the basic procedure in acquiring a residential mortgage. First, carefully select the type of lender / broker you wish to employ and short list to the specific lender / broker available to you. Second, summarize your financial information. Third, set an appointment to meet with the lending representative or, get in touch with their telephone banking group. Fourth, fill up their application documents completely and accurately. Fifth, allow some time for the lender to confirm your credit standing as well as appraise the property to be used as collateral.
During this time, the lender will also check accuracy of financial data that you have declared as income and assets. Sixth, await approval of underwriter who reviews the loan application. Seventh, land or property titles work is completed on the property. And, lastly, funds are released to the borrower at the time of 'closing'.
Now, the above steps may sound very simple. But, it has been proven that in today's modern world, many individuals who are looking into residential mortgages do employ loan specialists to assist them in this task. Not only do they provide general comfort and convenience, but, they are also able to assist in getting the best deals in mortgage loans; thereby translating into long term savings.
A loan specialist will help find the appropriate residential mortgage to suit current and future financial standing. Even the tedious application form fulfillment is also covered by loan specialist services. In fact, a pre-qualification analysis can also be performed for the borrower's reference and benefit. Vital information on the mortgage application will be verified and additional data will be required to further strengthen chances of approval.
