What is a mortgage loan?

The term mortgage loan refers specifically to loans that financial institutions make to individuals to finance the purchase or improvement of a home.

Typically, mortgage loans cover a sizable share of the value of the property (70% or more) depending on the bank’s financing policies, and have repayment periods that span up to 20 years or more (different banks apply different terms).The borrower repays the loan over the repayment period, with an interest rate appropriate to compensate the lender for the expenses it incurs in making the loan and the risk that the institution takes on, while also providing a reasonable return to the lender.

What is the purpose?

A mortgage loan can be used to purchase a house, make home improvements, or purchase furniture. Typically, a mortgage loan is secured by a lien on the property that is being financed, which gives the lender recourse to the property in the event that the borrower does not fulfill his or her obligations.