Mortgage Loan Financing

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The mortgage loan financing sector has developed immensely in India in the past few years and its net worth has grown to US $ 18 billion. Some of the renowned banks in the public sector as well as the private sector has begun mortgage loan financing.

Key Constituents of Mortgage Loan Financing:

The term mortgage loan financing denotes a loan which is granted against the property of the borrower and this property is considered as the collateral for the loan. The key constituents of mortgage loan financing comprise of the rate of interest, a specific sum of money that the borrower has to pay the lender at regular intervals for the loan, the tenure of the loan, the regular payments made towards the principal amount of the loan and the repayment procedure.

Mortgage Loan Financing Process:

Mortgage loan financing is presently done either through the fixed rate mortgage process or through the variable or adjustable rate mortgage process. In the fixed rate mortgage process, the mortgage lender lends money at an agreed rate of interest which remains same for the entire tenure of the loan. In the variable rate mortgage process, the mortgage lender lends money ab initio at a fixed rate of interest for an agreed period of time and then modifies the rate of interest, in accordance with the market indexes.

Repayment procedure in Mortgage Loan Financing:

Mortgage loan financing incorporates several loan repayment procedures, the most common repayment procedure adopted by the majority of mortgage loan financiers is the capital and interest repayment procedure. However, capital and interest repayment procedure is seen to be completely inverted in the special repayment plan which requires neither the repayment of capital nor the repayment of interest. There are two more variations to the capital and interest repayment procedure, the first variations requires the repayment of the interest amount exclusively. The second variation to the capital and interest repayment procedure involves the partial payment of the principal amount, but complete payment of the amount of interest.

Default Procedure in Mortgage Loan Financing:

In case the borrower is not able to pay off his debt by the aid of any of the above repayment procedures then the mortgage lender is allowed the choice to appropriate the mortgage amount by selling the property which was kept as security for the repayment of the loan.

Kinds of Mortgage Loan Financing:

Varied market requirements has led to the formulation as well as implementation of a large number of mortgage loan financing schemes worldwide. Some of the prominent mortgage loan financing schemes include:
  • Assumed Mortgage
  • Commercial Loan
  • Reverse Mortgage
  • Budget Loan
  • Seasoned Mortgage
  • Equity Loan
  • Jumbo Mortgages
  • Participation Mortgage
  • Bridge Loan
  • Non-Conforming Mortgage
The Indian mortgage loan financing sector has been facilitated by the entry of the renowned banks like the State Bank of India, Citibank, HDFC, HSBC, ICICI etc. in mortgage loan financing.

Last Updated on 5/26/2011