What is a mortgage loan? Learn the basics of mortgage loans.
Mortgage In life, we experience certain situations, from which we cannot avoid some expenses. Some of these expenses include business expansion, marriage, medical emergencies or education. One solution to meet these needs is to take a mortgage loan. Mortgage loans are secured in nature. To get this type of loan against property, the borrower must pledge the property with the lender. The collateral is held by the lender until the loan is fully repaid. Loan Repayment: Repayment is done through equal monthly installments or EMIs.
What is a mortgage loan?
A mortgage loan is a loan against the property you own. The asset in question can be your house, shop or a non-agricultural piece of land. Mortgage loans are provided by banks and non-banking finance companies. The lender provides you the principal loan amount and charges you interest on it. You will repay the loan in affordable monthly installments. Your assets are your collateral and remain in the possession of the lender until the loan is paid in full. As such, the lender has a legal claim on the asset for the term of the loan, and if the borrower defaults on the loan, the lender has the right to seize and auction it.
insurance and mortgage loan
Types of mortgage loans?
There are different forms of mortgages:
Simple mortgage: In this type of mortgage, the borrower must sign an agreement that if he/she is unable to repay the borrowed amount within a fixed period, the lender can sell the property to anyone to get the refund.
Mortgage by Conditional Sale: Under such a mortgage, the lender may place a certain number of conditions that the borrower must comply with in terms of repayment. These conditions may include sale of property if there is delay in monthly installments, increase in interest rate due to delay in payment etc.
English Mortgage: During this type of mortgage, the borrower has to transfer the asset in the name of the lender while borrowing money, on the condition that the asset will be transferred back to the borrower once the full amount is repaid.
Fixed-rate mortgage: When the lender guarantees the borrower that the interest rate will remain the same throughout the term of the loan, it is called a fixed-rate mortgage.
Consumer mortgage: This type of mortgage benefits the lender. The borrower owns the property for a fixed period of the loan period, can rent out the property or use it for other purposes until the amount is repaid. But most of the rights rest with the owner.
Quirky Mortgage: A combination of different types of mortgages is called Quirky Mortgage.
Reverse mortgage: During this case, the lender gives money to the borrower on a monthly basis. The entire loan amount is divided into installments and hence the lender gives the money to the borrower in installments.
Equity Mortgage: During this type of mortgage, the title deed is given to the lender. This is often a standard occurrence in banking mortgage loans. It is done to protect wealth.
What is a mortgage agreement?
A mortgage loan agreement sets out the terms of the agreement between the bank and the borrower. When marked, the covenant gives the borrower access to funds. Such an agreement also gives the lender the right to claim the property sold if the borrower defaults on the loan installments.
Importance of mortgage:
Buying a home is probably the biggest purchase you will ever make and a home loan will be your biggest liability. You can spread payments on your home loan over several years, so the amount you pay each month is more reasonable and cheaper!
When individuals take out their first mortgage loan, they usually choose a longer term. However, there are no guidelines on this and as we live longer and the retirement age increases, the 30 year mortgage is becoming more common. This may help reduce your monthly payment, but on the other hand you will be burdened with the liability for more.
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It’s worth going for the shortest term you can afford – not only will you be mortgage free sooner but you could also save a huge number of pounds for your own good. Also, remember, when you remortgage and change to another product, you shouldn’t settle for another 25 or longer term.
Life Insurance means a life insurance policy is a contract between an individual and an insurance company. In this contract, the insurance company provides financial protection to the policy holder in lieu of premium. The policy matures on the death of the policy holder. After some time the insurance company pays the sum assured to the family of the person. There are different types of life insurance policies in the market as per the individual demands and needs of the policy holder. Here experts are giving detailed information about life insurance.
How many types of life insurance are there?
There are different types of life insurance. You can choose any plan as per your requirement.
>> Term Life Insurance Plan- This is a fully risk cover plan.
>> Unit Linked Insurance Plan- This plan is an investment opportunity along with insurance.
>> Endowment Plan- Insurance and Savings.
>> Money Back- Regular periodic returns with insurance cover.
>> Whole Life Insurance- Whole life coverage for the policyholder.
>> Plans for children- Children’s life goals like marriage and studies.
>> Retirement Plan- For income after retirement.
Term life insurance plan
Term life insurance plan can be said to be the most affordable type of life insurance. It gives you life cover without any savings or profit element. Term life insurance plans are the most affordable type of life insurance. Term life insurance plans have lower and cheaper premiums as compared to other plans.
Unit Linked Insurance Plan (ULIP)
A unit linked insurance plan is a perfect blend of investment and insurance. A part of the premium paid for a unit linked insurance plan is used as insurance cover and a part is used to invest in various funds. Depending on the risk taking capacity of the policy holder the policy holder can invest in various funds introduced by the policy company. The insurance company then invests the collected amount in various money market instruments like shares and equities.
An endowment plan is a traditional life insurance policy that combines insurance and savings. In an endowment plan, if an insured person outlives the policy period, the insurance company also pays the maturity benefit to the policyholder. Apart from this, some endowment plans also offer bonuses from time to time. This bonus is paid on maturity or in case of death of the policyholder
Money back (money back plan)
In a money back life insurance plan, a portion of the sum assured is paid directly to the policyholder at regular intervals as a survival benefit. In this way the policyholder can achieve short term financial goals.
Whole life insurance
A whole life insurance plan provides life insurance cover for the entire life or in some cases up to the age of 100 years. The sum assured is determined while buying a whole life insurance plan. A nominee is mentioned after purchase. In case of any unfortunate event they are also paid death claim and bonus if applicable.