Loan Capital: Mortgage - SS2 Accounting Lesson Note

A mortgage is a loan that is used to buy a property, such as a house or a piece of land. The property acts as collateral for the loan, which means that if the borrower is unable to make the loan payments, the lender can take possession of the property and sell it to recover the money owed.

The role of mortgage is to provide a way for people to finance the purchase of a property without having to pay the entire amount upfront. Mortgages allow people to make smaller, more manageable payments over a period of years, typically 15-30 years. The interest rate charged on the mortgage is based on several factors, including the creditworthiness of the borrower, the length of the loan term, and the current market interest rates.

Mortgages are typically issued by banks, credit unions, and other financial institutions. The mortgage loan is secured by the property, which means that the borrower must maintain the property and keep up with any property taxes and insurance payments. Failure to do so can result in the lender foreclosing on the property and taking possession of it.

Mortgages also play a crucial role in the real estate market by providing a way for people to buy homes and properties that they may not otherwise be able to afford. They allow people to build up value in their homes over time, which can be used for other purposes such as borrowing against the equity or selling the property for a profit.