Residential Mortgages

When we hear the word ‘mortgage’, it’s usually residential, or home mortgages which automatically to mind. Although there are a variety or mortgages, the core concept relates to the transfer of an interest in property to a lender as a security for a debt - usually a loan of money. While a mortgage in itself is not a debt, it is the lender's security for a debt. It is a transfer of an interest in land (or the equivalent) from the owner to the mortgage lender, on the condition that this interest (the land) will be ‘returned’ to the owner when the terms of the mortgage have been met. In other words, the mortgage is a security for the loan that the lender makes to the borrower.

A mortgage is the standard method by which individuals and businesses can purchase real estate without the need to pay the full value immediately from their own resources. A mortgage loan (what most homebuyers, and most of the pages here at Loanpuppet, focus on) is a loan secured by real property through the use of a note which proves the existence of the loan and the encumbrance of that realty through the granting of a mortgage (see our ‘core concept’ definition above) which secures the loan.

A home buyer can obtain financing, in this case a mortgage loan (or, simply ‘mortgage’ as it’s so often referred to), to either purchase or secure against the property from a financial institution either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably. Generally, the cost to the borrower is measured by the annual percentage rate (APR), which is an effective annual rate of interest and fees paid by the borrower to the lender. However, the cost to the borrower can vary greatly depending on the type of loan and its specific terms.

For more information on the variety of mortgage loans available, check out our mortgage overview here.