Monthly Archives: May 2008

What is Mortgage?

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We often hear about mortgage. Do you know what is the real definition of mortgage is?

The definition a mortgage is an agreement to give up an interest in something if you fail to perform some duty. In many cases, it means that you’ll give up your home if you fail to repay your home loan as agreed. You can use mortgage as a verb, meaning “to pledge”.

Mortgage and “home loan” are often used interchangeably. However, the mortgage is really the agreement that makes your home loan work — the bank wouldn’t lend you hundreds of thousands of dollars unless they knew they could claim your home in the event of your default.

So, mortgage is not home loan. We are now know the different between them.

Loans

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We often hear this word in our daily life. What is Loan actually?

Loan is a type of debt. Usually people connecting loans with monetary loans only. A loan entails the redistribution of financial assets over time between the lender and the borrower.

The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.

Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.

Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money. This information is based on wikipedia.