A mortgage is a special type of loan guaranteed . The mortgage is special because the borrowed money is always secured by real estate. Real estate is any interest in land, including vacant land, structures on land and accessories that are a permanent part of the earth . Real estate mortgages include title to the land, as well as long-term leases in the same.

a mortgage


The most common use for a home loan is the purchase of a main home or the family home. Most people do not have the money saved to go out and buy a house to live in, so instead borrow money from a bank, credit union or other mortgage lender. The mortgage lender takes a mortgage lien on the home to secure the mortgage loan. The borrower takes the borrowed money and uses it to buy or build a house.



A mortgage loan, however, does not have to be used to buy a house. The defining aspect of a mortgage loan is that it is secured by an interest in real property. The borrowed money need not be used to buy or build in real property. Some employers, for example, take out a mortgage loan in order to raise money to start your business. Others take home loan to pay off other debts, such as credit cards and student loans.




Not all mortgages are similar. The defining feature of the mortgage loan is that the lender has a security interest, lien named in the debtor’s property. The lien allows the lender to foreclose on the real property in the event of default by the borrower and retain the mortgage loan. Foreclosure is the sale of the security to raise money to repay the mortgage loan. A mortgage is not defined by what the money is used.



The main advantage of ordering a home loan instead of another type of loan, such as one business or personal is that interest rates on mortgage loans are much lower than in other types. The reason interest rates are lower is because the mortgage lien lender reduces the risk on the loan. Less risk equals lower interest rates. The lender has less risk because if the borrower defaults, then the lender has a security interest in the collateral and can generally satisfy the outstanding loan balance by running warranty.


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Although from a legal point of view a home loan does not have to be used for the purchase of real estate, many mortgage lenders make it a condition for receiving the loan. Many mortgage lenders require the borrower to use the money to purchase or improve the property that serves as collateral. For example, if you take out a mortgage on your home, many lenders will require that the money be spent to remodel, rebuild or otherwise improve and increase the value of your house. Of course, these requirements vary from lender to lender and loan to loan.