What is a mortgage?
A mortgages is a loan taken based on any previous asset to buy a new property. A loan is used to purchase any land, home, re-pay loan, gold, or other asset by showcasing a previous property or asset. The lender can calculate the amount owed on the previous property and allocate a sum of money. A lot of people go for mortgage loans. In India, gold mortgage loans are very common. These mortgage loans have interest rates based on the type of mortgage loan, and the principle amount can be repaid within the agreed-upon time period.
What Are the Different Kinds of Mortgages in India?
- Home Loan: For any residential property, a home loan serves as a standard procedural mortgage.
- Land Purchase Loan: To construct or buy any pre-construction apartment, this kind of loan is applied
- Balance Transfer Loan: Mostly used for transferring any existing home loan from one bank to another. The lender might ensure lesser interest loans while transferring huge loans.
- Top-Up Loan: When applying for higher amounts, sometimes the cap becomes small and a sufficient amount is not released from the lender. To fill the gap after some amount of time (usually 1 to 2 years), Lander can provide a top-up on the existing amount released.
- Lease Rental Discount (LRD): Before construction of any property any kind of loan is considered under LRD. Periodic payments with less interest rates can be considered under lease rental discount.
Read Also: Understanding Debt: Exploring its Meaning and Implications in English
How Mortgages Work (The Real Flow)
| Stage | Flow |
| Pre-Approval | Get a pre-approval letter from a lender to understand your borrowing power. |
| Application | Submit a formal mortgage application with financial documents. |
| Processing & Underwriting | Lender verifies your income, credit score, and property value. |
| Appraisal | A licensed professional in real estate determines the property’s market value. |
| Closing | Signing final loan documents and transferring ownership (if purchasing). |
| Repayment | Make monthly payment based based on principal and interest rates determined before taking loan |
Types of Mortgages In US and India
- Fixed-Rate Mortgage (FRM):Fixed interest rate concept is used in these mortgages. Whatever the loan period, no interest rate is increased or decreased till the end of repayment.
- Adjustable-Rate Mortgage (ARM): A floating interest rate is applied. Based on the market interest rate for the particular month, interest is levied. It mostly results in paying high amounts.
- Conventional Loan: Requires a 20% down payment and conforms to lending standards set by Fannie Mae or Freddie Mac.
- Government Loan: Less down payment and interest rates. If you’ve good credit score, you get this loan. Backed by the government (FHA, VA, USDA in the US). Insurance is also provided for the loan.
Average Mortgage Rates In US & India 2024
| Country | Weekly Average Rate |
| United States (30-year Fixed) | 5.87% |
| India (Home Loan) | 8.35% |
The Mortgage Process
The mortgage process typically involves several steps:
- Pre-approval: A NOC (no objection certificate) is required before processing. All the documents, budget,, and interest rates are discussed and submitted.
- Enquire market rate for other Lenders: Compare interest rates, terms and conditions, and fees from various lenders in the market.
- Submit Application: All the legal documents, Identification documents, original asset documents are to be submitted with a mortgage application with all attested with original signature.
- Processing & Underwriting: Lender checks for bank statements(Last 6 months), verifies your income, If joint loan(Checks both parties’ income), credit scores, and current property value.
- Appraisal: A licenced professional representing buyers or sellers in real estate transactions makes a futuristic calculation of the asset produced.
- Closing: Signing from both parties on all the final loan documents and transferring ownership (if purchasing).
In the End,
Make informed decisions. Research thoroughly the mortgage rates at different banking institutions. Take written statements before buying and mortgaging. Compare and then make crucial decisions.