What is a Mortgage?

By | March 21, 2011

The word mortgage has to be explained clearly before we start. Any property that is pledged to the financial institution/ bank until the repayment of a loan is done is called a mortgage. Generally houses, land etc are taken as mortgage.

The word mortgage loan would mean two different things in Indian scenario and US scenario.

In US, in case of a loan for new house and a loan for renovation or extension of existing house, both would be called a mortgage loan. This is because, the house that is going to be constructed or the house which is going to be extended or renewed, both are treated as mortgage basically.

In India, a loan sanctioned to construct a new house would be called a home loan even though it is going to be taken as mortgage for the loan. The loans for renovation and extension of an existing house would be called a mortgage loan or a home refinancing loan in the Indian scenario.

The loan amount or quantum of loan is generally slightly lesser than the actual current value of the property kept as mortgage. This is to ensure that the financial institution/ bank can recover the loan amount even if the loan is default.

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About Pradeep Yuvaraj

Pradeep Yuvaraj is a Co-Founder and Director at Finerva Financial Solutions Private Limited, a financial education company focused on personal finance education. He has penned over 250 articles relating to Personal Finance and clocked over 500 hours of educating individuals on managing personal finance. He is a serial entrepreneur and has been associated with 7 Start-ups. His entrepreneurial experience spans industries as varied as Education, Gas Engineering, Automobile Design, Software development and more recently a Pure play presentation design company. Prior to turning entrepreneur in 2005, he has worked for 3 of the top ten companies of the world - Shell, ExxonMobil and Total SA. This experience included handling Branch Operations, Channel Sales and Business Development across 5 states over a period of 8 years. He holds an MBA from Symbiosis and an Electronics Engineering Degree from the University of Pune.

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