Mortgage can be defined as a legal process of transferring ownership of property from one person (mortgagor) to another (mortgagee) in return of loan of money. The law binds both for the commitments they make. A mortgagor pays interest on the loan amount received from a mortgagee, and in the event a mortgagor does not pay on time, a mortgagee is allowed to exercise his or her rights to ownership or auction after receiving a decree to recover the loan amount with interest.

A mortgage loan can be defined as advance of funds by a mortgagee to a mortgagor after securing the property of the mortgagor as a collateral , legalizing by way of a document which clearly defines various parameters of the loan such as amount, term of loan and equated monthly interest (EMI). Such a document gives a mortgagee the legal right to repossess the property kept as collateral in the event the mortgagor fails to pay the principle and the interest.

There are two types of Loans: secured and unsecured. A mortgage loan is classified as secured, while a personal loan is treated as unsecured. Unsecured loans attract higher rates of interest, while secured (mortgage) loans are cheaper. This is because the risk of a mortgagee is relatively higher when a loan is not secured. The term of a mortgage loan is very high (up to 30 years); personal loans are short term.

There are three major factors to consider before taking a mortgage loan:

Mortgage rate of interest and Repayment Terms: between these two parameters, the mortgage rate of interest could vary between mortgage lenders, as also the product mortgaged for taking a loan.

Choice of mortgage lender: You can choose the right mortgage lender by directly approaching a party of who you have heard, by reading the yellow pages or by shopping on line. A recommended choice is to use the Internet, by which you get a wide choice, from a specialist mortgage provider to traditional High Street Mortgage lenders.

Your comfort level in making repayment of the Mortgage loan: be it for home mortgage or refinance mortgage or second mortgage, you must be comfortable to make repayment, as failure would tantamount to loss of property mortgaged. To ensure your comfort levels, make good use of a mortgage calculator, which is easily available on line. Using mortgage calculators, you can match the amount you could repay, the time span during which you can repay and the amount of a mortgage loan you can afford.

The calculation of a mortgage loan EMI is based on three variable factors: The principal amount, the term (period) and the interest rate. Generally, mortgage loans of larger amounts (like a home mortgage loan) are offered for longer period of time (term) and lower rate of interest. Mortgage loans involving smaller amounts (loans for products like a car or a computer) would attract higher rates of interest, with smaller terms (up to say 5-10 years). There are mortgage calculators available on line, which tell you the EMI in split seconds once you enter the parameters of principal amount, term (years) and rate of interest being charged by the mortgage lender in the designed boxes. An example of a mortgage loan calculator is being quoted below:

Parameters Results

Loan Amount $ 20000 Estimated Payment $ 387 Monthly

Interest Rate 06 % Total cost 23220

Term 60 months

Many sites exhibit the amortization schedule also on annual and monthly bases, the interest and principal amount paid, and finally balance of the loan amount at the end of the month.

Similarly other types of mortgage loan calculators available on line are for bi-weekly mortgages, APR (Annual Percentage Rate), and interest only monthly payment calculator. Therefore, depending upon the type of mortgage loan you have chosen, you can calculate your EMI accordingly by going to the relevant site.

The terms described in this note should help you think through your fund needs, and find a loan product that meets your needs and situation in optimal manner. Loan products judiciously chosen, help us progress our net worth and to provide for our dependants in adequate manner. Financial services are highly competitive in western economies, and provide outstanding value for discerning customers.