What Is a Mortgage Loan? Everything You Need to Know

Knowing what a mortgage loan is is essential if you want to fulfill the dream of owning your own home.

In general terms, a mortgage loan can be defined as one that you request for the purchase of a specific property. It can also be used for refinancing if applicable.

Continue reading this guide on mortgage loans. By the end, you will have all the knowledge necessary to discern the characteristics of this type of loan.

You will also learn about the access terms associated and the various options available in the market. As a result, you will be able to choose the mortgage loan that is most suitable for you.

What Is a Mortgage Loan?: Central Characteristics

Conceptually, a mortgage loan is a financial tool that facilitates the purchase of an asset (for example, a house or an apartment) or its refinancing.

Specifically, a sum of money is received based on meeting certain requirements with the aim of acquiring a specific property.

Below, we present some of its distinctive qualities so you can learn more about what a mortgage loan is:

It Requires a Mortgage Guarantee

For the mortgage loan to take place, the property itself must be established as collateral.

It serves as an economic backing for the financial institution in case of payment default.

Consequently, if the scheduled payment commitments are not met, the financial institution can proceed with the foreclosure of the property.

There are different types of mortgage guarantees:

• The mortgaged property: is a collateral that the company granting the loan can claim.

• Mortgaged commerce: in the case of mortgage loans to acquire properties for buying and/or selling products or providing services, the guarantee is the commercial property itself.

• Second mortgage: depending on the case, a property guarantee is established based on another loan that has a mortgage guarantee.

Another option within this category is a home equity line of credit. It serves as a security backing for the financial institution if the mortgage collateral cannot be collected in the event of economic insolvency.

Inter&Co helps you finance your property in the United States. We have professionals who can guide you on requirements, guarantees, and interest rates. Download our super app and see for yourself.

It Involves a Down Payment

Every mortgage loan requires a cash down payment to access it. This varies based on several factors.

In this section, we explain some of the most relevant factors to further optimize your understanding of what a mortgage loan is:

• Purchase price of the property: the down payment varies according to the total value of the asset to be acquired. It can range from 5% to 20% of the price of the home or business in question.

• The down payment affects the mortgage: the higher the amount you pay upfront, the lower the mortgage loan amount will be.

In some cases, interest rates may vary based on the characteristics of the down payment you make at the beginning.

• Loan approval timelines: sometimes, a larger cash advance speeds up the mortgage loan approval.

It Is Determined by Interest Rates

Depending on the guidelines established by each financial entity, a mortgage loan can have different interest rates.

Here, we detail some of the most common and relevant ones so you can better understand what a mortgage loan is and its implications:

• Fixed interest rates: the values of mortgage loans with these rates do not change over time. They offer better planning and stability for your finances.

• Variable interest rates: these are adjustable loans based on market financial conditions and their evolution.

These adjustable interest indicators can, in certain contexts, provide you with lower initial rates. However, they tend to increase over time.

Paid in Monthly Installments

Mortgage loan payments are made each month. Each installment is segmented as follows:

• Principal: the amount requested from the financial entity.

• Interest: set according to the specific qualities of the previously mentioned interest rate type.

On the other hand, when learning about what a mortgage loan is, consider that the installments have some variations.

For example, during the initial payment periods (even for years), the payments of a mortgage loan may consist mainly of interest exclusively or partially.

As you progress in paying off the mortgage loan installments, the differences between the interest payments and the principal decrease. That is, the interest payments decrease and the principal payment of the installment increases.

This varies depending on each specific case and the conditions agreed upon at the start of the loan application. Download our super app and submit your mortgage financing application in just a few steps.

Involves a Repayment Term

In most cases, mortgage loans tend to have long repayment terms. This is due to the large amounts of money requested.

Repayment terms can range from 10 to 30 years. Some financial entities offer even longer terms.

Why Choose Inter&Co to Apply for a Mortgage Loan?

Inter&Co is the ideal alternative for you to learn what a mortgage loan is and which mortgage credit options are most convenient according to your needs.

In addition, our specialists will advise you on the requirements to access mortgage credits.

We will also inform you about the steps to follow from the start of your mortgage loan application until the full repayment of the credit.

As a result of our high levels of efficiency in economic processes, you will have all the information required to carry out these mortgage transactions with a high degree of security.

Looking for a positive advisory experience on mortgage loans? Download our super app and achieve the dream of owning your home in just a few clicks.

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