Almost every individual realizes the need for mortgage at some point of time when planning to invest in real estate. For a fact purchasing a property by making the payment in full is next to impossible for majority of common wage earners, home loans are taken as a reliable source to acquire adequate funds to afford the purchase. This financing option not only comes with a bit lenient qualification criteria, it allows the borrowers to choose from a variety of options as per their needs and preferences. Mortgages are of various types and some of them are mentioned below.
A simple mortgage is a conventional funding option that is mostly opted by majority of potential home buyers. In such a case, the mortgagor promises to pay back the borrowed amount and agrees that in any event of loan default, the lender has full right to repossess the property and sell it to compensate for the loss.
By opting for this type of finance, apart from utilizing the real estate as a security, a borrower delivers the possession of property to the lending institute or bank until the borrowed amount is completely repaid. Once the borrower is able to successfully pay off the loan, he gets his property back from the lenders. During this period, the lenders are permitted to receive the rent and other profits associated with the real estate. However, one must make sure to repay the loan within stipulated time as failing to do so; the homeowner might end up losing his valuable asset to the bank.
Mortgage by Conditional Sale
When an individual plans to attain finance on his immovable realty by using it as a security, although the home ownership is not transferred to the lending institute, but the financing company is entitled to sell the house under certain conditions. This is known as mortgage by conditional sale. It means that the borrower has conditionally sold the house to the lender. The conditional sale turns into an absolute sale if the borrower fails to pay off the loan. On the other side, if the home owner is able to repay the loan on or before due date, he can recover his land and stop the sale process. A bank or lending company enjoys more benefits with this type of financing option as in such a scenario, a lender can entirely own the property in case of loan default.
In this type of funding option, the borrower agrees to deliver the title document of the land to the lender. This acts as a security to the lending institute, based on which, the borrowers are able to secure the required funds. The option is, however, applicable in only a few cities, so it is viable to know your options before applying for finance.
It cannot be denied that acquiring finance has become easy, but it is also vital to remember that there is a qualification criterion that you need to fulfill in order to enjoy the benefits of financing. Evaluate your needs and options prior to signing the dotted line to secure an affordable option.
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