house loan/mortgage

Question

Mary had to pay a lot of interest on her house mortgage/loan.I guess either mortgage or loan works in the above sample, but I doubt if they are identical in meaning. Your comments? Thanks.

Clive · Accepted Answer

Hi,

Mary had to pay a lot of interest on her house mortgage/loan.

I guess either mortgage or loan works in the above sample, but I doubt if they are identical in meaning.

Where I live, the common term is 'mortgage'. A mortgage gives the lender various legal rights that a loan does not.

Clive

Angliholic · Answer

CliveHi,

Mary had to pay a lot of interest on her house mortgage/loan.

I guess either mortgage or loan works in the above sample, but I doubt if they are identical in meaning.

Where I live, the common term is 'mortgage'. A mortgage gives the lender various legal rights that a loan does not.

Clive

Thanks, Clive, for your intriguing reply.

Now I'm intrigued by the various legal rights--would you shed more light? Thanks.

Clive · Answer

Hi,

Remember, I'm not a lawyer.

A mortgage gives the lender (typically a bank) the legal right to force a sale of your house if you do not pay your monthy payments. The lender can then recover their money from the amount the house is sold for.

I belive that a mortgage also restricts your ability to resell your house, unitl you pay it off or make other arrangements with the bank.

Clive

Angliholic · Answer

Thanks, Clive, for the helpful reply.

For the sake of curiosisty, since a house mortgage does seem so unfriendly and undesirable, why do people apply for it intead of a house loan? I doubt if there are also dark sides of loans, right?

Clive · Answer

Hi,

I didn't mean to give the impression that a mortgage is a terrible thing. On the contrary, it's agood thing. Without a mortgage, very few people could afford to buy a house.

Most people are able to pay their mortgages. The bank checks carefully before they give you a mortgage, to try to avoid such problems, to ensure that your income is adequate. It's true that if you can't pay, you have to sell your house and repay the bank. That's life.

When you want to sell your house, you just take the money you get from the sale and use some of it to repay the bank. It's easy.

The bank will only lend you money to buy a house in the form of a mortgage. Look at it from their point of view. If you lend me $300,000 to buy a house, you want to ensure that you will get your money back safely.

Clive

Goodman · Answer

Hi Angliholic,

Mortgage is a real estate loan which typically requires the borrower to put down a minimum of 10-20% of his own money toward the value of a property. Under the lending agreement, a lender (usually a bank) can legally repossess the property should the borrower fail to fulfill the payment obligation. What we pay every month is the mortgage payment. If a house is purchased for $500,000.00, the required down payment is 20%, the home loan, or the mortgage loan is $400,000.00. This amount in real estate term is the mortgage. But in general, most people have a common understanding or misunderstanding with the use of “home loan” and “mortgage loan”.

Here is an interesting concept. Mortgage payment is calculated with a mutual binding interest rate at the time of the lending. This interest rate is figured into the monthly mortgage payment. If the mortgage loan is $ 400,000.00 on a 6% interest, with a loan term of 30 years, your monthly mortgage payment is approximately $2,400 dollars. Out of this amount, roughly only 5 % is going toward the principle and the rest is interest for the first 15 years which is the half way point. Passing the this point, the payment amount going toward the principle increases every year. In short, by the time the last mortgage payment is made, a $400,000.00 loan will have added up to over $800,000 dollars.

The following chart illustrates the difference between 15 year loan vs. 30 years. The sample mortgage amount is $150,000. By shortening the loan term which essentially meaning paying a lot less interest, the saving is nearly $ 100,000.00. That’s the basic explanation. In the past few years, the leaning rules had been bent by leaners to promote more sells. As a result, many bad loans were made against the principles. That’s how the real estate market cames crashing down, because of the non-qualified loans. I could do another thread about this but the welcome mat may get pulled out from under me

.

15-year	30-year
Basics
$150,000	$150,000	Loan Amount
5.75%	6.00%	Interest Rate
$1,246	$899	Monthly Payment
$224,211	$323,757	Total Payments

Angliholic · Answer

Thanks, Clive and Goodman, for the clear and bountiful info.

house loan/mortgage

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