What’s The Difference Between A Mortgage and Other loans?
A loan is a relationship between a lender and borrower. The lender is also called a creditor and the borrower is called a debtor. There are several types of loans available, one of the most important is a mortgage. Mortgages are secured loans that are specifically related to real estates, such as land or a home. The property is at the disposal of the borrower in exchange for money paid in installments over time. The borrower resides before the full value of the property is paid. However, some key differences set mortgages apart from other loan types:
- Mortgages are used specifically to buy (and sometimes renovate) real estate and can not be used for any other purpose.
- The lender pays the money directly to the home seller and the borrower doesn't receive the money.
- The mortgage has a high degree of flexibility so that the down payment amount, loan term, loan schedule, and other features of the mortgage can be greatly controlled.
- As mortgages are more expensive than other loans, they have more stringent requirements than other loans, because a mortgage lender wants to make sure the borrower repays them. To ensure repayment of the loan, lenders require the minimum requirements for items such as credit points, income, existing debts, and assets.