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Q:
What is a Mortgage?
A:
A mortgage is a form of loan, which is taken out against property
(real estate). The definition of property may include a house,
a flat, or an apartment, although mortgages cannot be taken out
against any other assets such as a vehicle, stocks and shares,
or other investments. A mortgage can also be taken out against
an office, a shop or a factory (this is known as a commercial
mortgage), or against a property which the owner intends to rent
out to other tenants (buy-to-let mortgage).
The origins of the word mortgage come from the ancient French
words mort (death), and gage (a pledge). However, a taking out
a mortgage did not mean that the mortgagee expected to die if
he did not pay back the mortgage; it merely meant that his entitlement
to the mortgaged property would cease if he fell behind on his
payments.
Other mortgage related terms:
- Mortgagee - these can either be the person
who takes out the mortgage, or it can be the bank or building
society which makes the loan.
- Lender – this is the usual term for
the organisation making the loan. In the UK, this is usually
a bank or building society. In the USA,
Credit Unions may offer mortgages to their members.
- Home Loan – the term used for a mortgage
in the USA.
For a full list of the mortgage related terms, please consult
our mortgages glossary, or
visit our full financial
services glossary.
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