Anatomy of a Mortgage
Mortgages were the original home loan agreement. In many ways, the mortgage
changed the real estate market completely and turned it on its head in a very good
way. Before the advent of the mortgage, the only way for people to go out and get
what they wanted in terms of property was to pay for it outright. Since very few
people possessed the means back then to pay for property outright, the ownership
rights were only there for pretty much the upper middle class and the upper class
people; the middle class downwards were excluded from this very important thing.
Mortgages changed all of that and to understand how profound a mortgage is, it is
important to take a close look at exactly what a mortgage entails.
The agreement for a mortgage is one that is the main point of everything else that
follows. Under the agreement of a typical mortgage, the person has the ability to
borrow money from the bank in order to pay for a house or a property. The amount of
money they can borrow varies, but for the majority of banks it usually resolves itself
towards being around 95% of the actual quoted value of the house. In exchange for
getting this very large loan, the person then agrees to put the house up as collateral
against that loan, so that the bank has some way to save itself in the event that the
person is unable to pay that loan back.
Now, whenever people think about loans, very likely the first thing that they think
about is interest rates. There are a number of different interest rates involved in
different loans, but when you compare the vast majority of them to what is available
under a mortgage, what you find is that the vast majority of those interest rates don’t
really match up. The average mortgage has an interest rate attached to it
between 5% and 7% and the vast majority of loans that are available on the
marketplace today, even if they happen to be secured loans, really can’t match up.
Just like with the interest rates, the r