A mortgage is something that can be obtained by using one’s assets as collateral, like if they owned out-right a piece of land, building(s), house(s), or property that has been previously paid off, in order to get a loan to buy a house, with the loan guaranteed by the house itself. A mortgage consists of a debtor and a creditor. With the debtor being the property’s owner and the creditor being the lender. Once the mortgage transaction is complete, the debtor is given the loan money and consents to repay it. Over a certain time period that has been agreed upon, generally by monthly payments, the creditor gets back their money, along with the money they make off of loaning it to you, which they receive as interest during the duration of the payback period. Should the debtor not pay the loan back as agreed, the creditor can take the house for that loan amount, this referred to as a foreclosure.
The reason for the American economic failure in the year of 2008 was because there were too many debtors getting qualified to receive the loans that somehow slip through the cracks or their circumstances changes suddenly after so they were not able to keep up with their agreed upon payments. Therefore, the results were drastic, lowering the price of housing, which was hurting the economy.
What is simple mortgage?
A mortgage is where a transaction takes place without giving possession, ownership, or occupancy of said property, instead, the mortgagor is literally binding himself into an agreement of paying back the mortgage amount as agrees, or thereby breaking his contract, giving the mortgagee the right to sale the property by decree, which means to get an order of law in a court suit action to sale said property and the proceeds will go to the mortgagee towards the mortgage loan amount.
In a case such as this there will not be a foreclosure of the property.
English Mortgage
In an English mortgage the borrower agrees to repay the lender by a given date, transferring the property to the lender until such time. At the time of the agreed date if the borrower has not breached his agreement of repaying the lender will then re-transfer said property back to the borrower, and property will belong to the borrower being fully paid of the agreement.
Usufructuary mortgage
For the usufructuary mortgage, the property will go to the lender, and any income from the property will also go to the lender, such as profits, interest, rents, and etc., until the borrower has paid the lender back. However, the owner of the property keeps the tittle and any deeds.
What is interest?
The way that a lender makes money from loaning money is through the interest they charge the borrower on the loan, in other words, it is what you pay for the cost of getting the loan in the first place. This is what is referred to as the interest rate.