What is the definition of Mortgage?
Mortgage loans are one of the sought-after loans in recent years alongside the mortgage definition. We can define the mortgage, a piece of immovable property pledged to the lender for the loan’s security.
The lender will be the owner of the prospective property if the borrower defaults to pay the debt according to the terms. In this way, the purchased property becomes collateral which is typically known as a mortgage.
Mortgage Definition in Real Estate
In the world of real estate, a mortgage could be any property asset—the lender reserves the rights of—until the borrower adequately returns the entire amount of the debt. The home’s value(pledged property) should be worth equal to the loan amount.
If the borrower fails to return the loan amount within the given terms and conditions, the mortgage lender or mortgage broker reserves all the rights to foreclose the property. In real estate terms, claims on property or liens against the property are some of the other names of mortgage.
Mortgage Redemption Insurance
Mortgage Redemption Insurance(MRI) is a type of insurance policy that backs up the lender if the borrower dies or meets any disability during the mortgage repayment period. The Federal Housing Administration(FHA) offers mortgage insurance if the loan is made by FHA approved lenders.
It costs a specific amount to the borrower, which is effective from the day the mortgage loan is credited into the borrower’s account. The implied fee isn’t fixed and decreases month-wise.
Some mortgagees ask for redemption insurance if the deposit amount is below 20% of the loan. Also, some insurance companies permit ongoing insurance as MRI. In such special cases, the borrower must declare the lender beneficiary of the ongoing insurance after specific requirements are met.
Like Private Mortgage Insurance(PMI) which protects the lender, Redemption Insurance protects the borrower since it prevents the foreclosure or sell-out of his house, which ultimately protects his heirs emotionally and financially.