Meaning and Concept of Mortgage Loan

Buying a house can often be the single biggest investment you’ll ever make. An investment decision is made possible by a mortgage loan.

But the real question is:  What is a mortgage?

A mortgage is a loan by banks or other institutions that a person can use to finance or purchase the home with down payment and to pay the remaining amount over time with interest. A mortgage is different from other loans like personal or education since the bank uses your house or any immovable property as collateral, it means if you’re not able to pay the principal amount of your loan to the bank, they can take possession of your home. 

Section 58 (a) of the Transfer of Property Act, 1882, clearly defined as: 

A mortgage is a transfer of an interest in specific immovable property to secure the payment of money advanced or to be advanced by way of loan, an existing or future debt, or the performance of an engagement which may give rise to a pecuniary liability

Understand The Concept of Mortgage Loan

Let’s take an example:

  • A couple wants to buy a home of Rs 1 crore, so they go to a bank or any other lender.
  • A Bank will prepare a loan agreement (also called mortgage deed) after verifying the documents and they will keep mortgage a house or any immovable property as collateral.
  • A mortgagor or a homeowner will pay (let’s suppose) a 20% downpayment of the total amount of home and remaining he/she will pay the principal along with interest to the lender as per the loan deed. 
  • After loan approval, ownership of the home will lie to the homeowner, and it will be forfeited in the event of a default. It means if something happens to the mortgagor(homeowner), the bank or lender will take possession of the home and recover the amount after the sale of a house.

Who takes a Mortgage?

Normally individuals and organizations use mortgages to purchase any immovable property without paying the full amount to lenders. It’s easy for banks to lend a secured loan when the house is mortgaged, as security. This is the basic concept of the Mortgage loan. In the case of Home loan, Mortgage is created on immovable assets. Home Loan is another example of Mortage loan, and it is also called “loan against property“. 

3 Things to know while making a Mortgage, if you have Bad Credit.

The process required for getting a mortgage loan can be intimidating even to people with good credit, but it can be worse for a person with bad credit. If your credit is bad right now, you might still be able to qualify for a mortgage loan. It might be harder to do, but it will not be completely impossible. Here are three things you should know if you have bad credit and want a loan to buy a house.

Look For Loan Programs For People With Bad Credit

Certain loan types require good or even great credit, but there are other types of loans that are designed for people who do not have good credit. For example, you might be able to qualify for an FHA loan. If you do, you might be able to buy a house with a down payment of only 3.5%. This will depend on your credit score, though. You can talk to a lender to find out if this loan program would be your best option. If not, your lender might discuss other options.

You Will Pay A Higher Rate

The second thing to know is that people with bad credit pay higher interest rates on their loans. Interest rates are tied to risk, and people with bad credit are considered high-risk borrowers. High-risk borrowers pay more for the money they borrow, and this is reflected in the interest rates they get on their loans.

Having a higher interest rate will result in paying higher monthly mortgage payments, but you might not have to do this for the entire 30 years of your loan.

It Can Help You Build Your Credit

The final thing to understand is that getting a loan to buy a house could be the ideal way for you to build and repair your credit. Each month, you must make a payment on your loan. When you do this, the lender will post your payment details to your credit report. Over time, this will help you build a positive repayment history, and this will help your credit score increase.

Within a few years, your credit might be good enough to refinance your loan and get a much lower interest rate.

If your credit is not very good, you might still qualify for a home loan. If you would like to find out if you do, contact an agency that specializes in home loans. 


Who doesn’t wish of their own home? You can fulfill your dream to buy a home through a Mortgage loan. When the mortgage (bank or lender) approves the loan, you pay some down payment of the total amount and the remaining amount is paid along with the interest until the term of the loan is completed. The mortgage is not a loan, you just keep your property with the lender as a mortgage. It has a lot of types and variables. If you need a mortgage loan, you can talk with financial experts. 

Leave a Reply

Your email address will not be published. Required fields are marked *