What is mortgage loan?

Wondering what is mortgage loan? Here is a quick and simple definition for your understanding. 

A mortgage loan is a secured loan where you keep an asset or a property as a mortgage with the lender or the bank. A mortgage is a security against the loan which is agreed upon to be paid back in time as decided by the lender and the borrower, typically in a series of regular payments, also known as EMI (Easy Monthly Installments).

Many people are confused about what is the rate of interest for a mortgage loan. Well usually, interest rates on a mortgage loan range from 8.15% to 11.80%, and the borrower gets funding of up to 60% of the registered value of the property. 

There are 6 types of mortgage loans, Home loans, Commercial property loans, Lease rental discounting, second mortgage loan, reverse mortgage loan, and loans against property. 

A home loan can be used to buy a home or construct a home, similarly, commercial property loans can be used for buying/ building a commercial property. The monthly rent earned on leased property is considered EMI in case of lease rental discounting. A second mortgage loan or top-up loan is given against a property that is already under a loan, it is strictly based on the credit and repayment history of the borrower. The recent introduction of a reverse mortgage is especially for the elderly who own real estate, they can keep their property as a mortgage with the lender who in return gives them monthly income in the form of EMIs, which is directly deducted from the amount in which the real estate is sold after the demise of the senior citizens. Whereas there are no end-use restrictions for loans against property, it can be used for expanding business, acquiring assets, education needs, marriage, etc.

When you apply for a mortgage loan with a lender, they give you money to buy a home/property on the condition that you will pay back the loan with interest within a stipulated time period. Until you fully pay off the mortgage loan, the property owner will not be yours completely.