Finance has many branches and real estate finance is one of them which manages the investments in the real estate business like acquiring plots of land, making houses, gardens, other buildings, etc. for business purpose. Like any other arm of finance, this sector also has its own risks and gains which are managed by the professionals to increase the acquired property’s value.
The term real estate means plots of land, houses and any kind of man made improvements on the plot of land. Now, real estate investment means investing the money in the above mentioned properties with a purpose to let that money grow steadily. Real estate investment is a golden business opportunity which can help the money to grow manifold because there is several options related to real estate like placing a real estate property as a security to avail a loan for any professional purpose.
Again the property can earn cash in the form of rent, for the investor or owner and at the same time it can save some part of taxes for its owner.
Again, the appreciation value of the real estate property reaps capital gains or profits for the investors. Because of all these growth prospects, the professionals and experts of this field always suggest that a person should always include real estate in the investment plans.
Although it is a long term process but returns heavily and also it is a steady medium and because of this, the equity investors and borrowers holds that, any investment decision related to real estate is a financing decision. The real estate mortgage business can be said as the most recent growth in this sector.
Mortgage, as an investment option
Because mortgage loans are underwritten carefully with required credit and collateral, they are extremely safe investments and thus it is a sound investment option. The real estate and mortgage industries are expanding rapidly and most experts from the real estate field are suggesting to consider this type of investment seriously. A huge amount of money, which is more than trillion dollars are growing steadily in residential mortgages and commercial mortgage markets. An individual investor buys mutual funds and becomes a part of this market. Now-a-days, residential mortgage is very rapidly, becoming the usual process of buying a home.
The definition of a mortgage finance or loan can be given as a loan which remains secured by the collateral which means the physical property. This loan or finance is granted to buy a material possessions or real estate, and the loan which carries a definite loan term and interest rates. If the borrower fails to return the money in time, the lenders becomes the legal owners of the collaterals.
There are several terms related to the process:
Face Value: The face value of the mortgage is the original principal amount financed by the lender.
Mortgagor and Mortgagee: The borrower is called the mortgagor and the lender is called the mortgagee
Term: The period in which the borrowed amount should be returned with the interest. The term usually consists of 20 to 25 years and fixed interest rates are proposed for 6 months to 5 years period.
First mortgage and Second mortgage: The current mortgage is called the first mortgage and the second mortgagee is termed as the second mortgage.
Last Updated on : 1st August 2013