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Mortgage Loan
is a loan secured by a mortgage on real property; the "mortgage" refers to the legal security. Mortgage loans generally refer to a loan secured by residential property, often for the purpose of acquiring the residence. Mortgage loans may be lower priced than other forms of borrowing because the value of the property reduces risk for the lender.
Mortgage lending is the primary manner used in many countries to finance private ownership of residential property. Although the terminology and precise forms will differ from
country to country, the basic components tend to be similar:
* Property: the physical residence being financed. The exact form
of ownership will vary from country to country, and may restrict the types of lending that are possible.
* Mortgage: the security created on the property by the lender,
which will usually include certain restrictions on the use or disposal of the property (such as paying any outstanding debt before selling the property).
* Borrower: the person borrowing who either has or is creating an
ownership interest in the property.
* Lender: any lender, but usually a bank or other financial
institution.
* Principal: the original size of the loan, which may or may not
include certain other costs; as any principal is repaid, the principal will go down in size.
* Interest: a financial charge for use of the lender's money.
* Foreclosure or repossession: the possibility that the lender has
to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan; without this aspect, the loan is arguably no different from any other type of loan.
Governments usually regulate many aspects of mortgage lending,
either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such
as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities).
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