Things to Know Before getting a Mortgage

Many people will say never to be involved with loans, as it will drown, suffocate, and kill you financially. But for some individuals who seem to foresee the future, instead of seeing the negative, they reap the benefits of it—the benefit of a more secure life.

In the latter, it provided a car for them to have an endless journey, most importantly, a refuge for them to sleep or a home. Well, nothing is more important than a sweet home, especially for a growing family.

And if you’re thinking of a mortgage as a way to have a loan, then you’re on the right path, as it’s the most suggested way to have one—a type of loan that will be secured and follows the legal agreement.

But what is a mortgage?

Let’s put it as two people involved, the Creditor and the Debtor. But in the broader scope, the creditor is likely a bank or financial establishment. They are the ones that lend money in return of interest.

The debtor is the borrower who must be obliged to follow the terms and condition of the lender or creditor. There is a difference between creditor and debtor. Their transaction, both creditor and debtor, has its function, as any lending or mortgage arrangement without another, will cease to exist.

Furthermore, creditors will be differentiated with lending money and extending credit.

These are the difference between lending money and extending credit:

  • Lending Money. Having a creditor does not mean having someone with a sensual trust. For them, the debt of the borrower is the bread and butter for their employees and establishment. In other words, it keeps the business running. Then the creditor may as part of the agreement of transaction ask for collateral.

  • Extending Credit. This is where the creditor provides some financial aid for them to cope up with the competitive marketplace. This type of lending does not require any collateral as it is paid in a short period of time.

Types of Collateral

1. Real estate. Among the types of Collateral, this is most common. Perhaps most people have this property or asset with the highest value. And it’s low in depreciation compared to items, especially appliances. But having a home as collateral is very risky as it may be sequestered or taken out legally.

2. Cash secured loan. Nothing is more simple than to pay cash owed with cash as well. The transaction is mostly done with an active bank account. The creditor may get the borrowed money in return in terms of non-payment.

3. Inventory financing. This applies to business owners who have inventory. These will be set and used as collateral for the loan. If the debtor fails to pay the loan, items on the inventory as agreed to will be taken by the lender for them to sell. To somehow recover and make it up for their loss. And run the business smoothly.

4. Invoice collateral. Small business owners mostly use this—a type of collateral where the invoices of unpaid customers will be set as Collateral.

5. Blanket liens. This is simply giving away the right of ownership until the Debtor paid what is owed. And the failure of payment will give full ownership to the creditor.

Advantages of getting Mortgage

Here are some advantages of getting a mortgage:

Affordable Home Ownership

Having a house to stay is a dream of many, but only a few people managed to acquire them. So many people still rent in their 30s, and we can’t judge them. But given the opportunity of mortgage, many individuals now have a place to stay with a minimum amount down payment. And with the assistance of a mortgage, it is made affordable with agreeable terms. The lender or creditor then divides the loan for several years, making it manageable.

Investment Opportunity

What could go wrong when you use the loan for investment. It might be risky, but it’s totally worth the risk. The circulation of money perhaps is one of the easiest ways to earn. It can also be a self-reliant investment. With enough knowledge about investment, a business can rise and provide financial stability.

Cost-effective way of borrowing

There are different lenders that offer loans with low-interest rates. And take into consideration that there are a lot of loans available.

A mortgage is one of the best choices, especially if you’re not quite familiar with it. Lenders also vary in offering different types of mortgage.


Indeed financial needs come along the way. And tough times bring about our decisiveness to solve it. If you wish to know more about mortgage, you can click here for further references. And knowing enough about mortgage and how it function comes handy as an aid for a financially stable life.

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