The word Mortgage is derived from Old French and means a “dead pledge” implying that the pledge comes to an end when the obligation is fulfilled or in the event of a foreclosure. A mortgage loan is one that is taken out by placing the owner’s interest (property) as collateral. Mortgage lending is useful since very few people have the liquidity or the funds for an outright purchase.

• Some of the common features of mortgage include a property, a borrower, a lender, and the interest charged by the lender. The most important feature that separates other loans from a mortgage loan is the lenders power to repossess or the right to foreclosure in certain circumstances. If the borrower is unable to pay back the loan then foreclosure may come into picture.
• Governments generally control numerous features of mortgage lending, either openly (through legal requirements, for example) or in some way (through ruling of the participants or the financial markets, for instance the banking industry), and regularly through state involvement (direct lending by the government, by state-owned banks, or backing of various entities). Additional features that define a specific mortgage market might be provincial, historical, or driven by detailed characteristics of the legal or financial system.
• Mortgage loans are usually long term loans and can last for ten to thirty years. The lenders earn profit because of the interest paid by the borrower. The most fundamental agreement would necessitate a flat monthly payment over a period of ten to thirty years, depending on home conditions. Over this time the principal constituent of the loan (the original loan) would be gradually paid down through amortization. In practice, numerous variants are likely and common globally and within every nation.
• There are two basic types of loans: fixed rate mortgage and adjustable rate mortgage where fixed rate mortgage has fixed payments and adjustable mortgage has variable payments. Combination of both these are also common in many countries where the loan will have fixed rate for some period and will vary after the end of such period.
• Lenders in many markets rely on a person’s credit history and credit score in order to judge the amount of risk posed by the borrower. A good credit score may mean lower payments and a bad credit score will subsequently lead to higher interest rates and thus bigger repayments.
• There are many other types of mortgages such as assumed mortgage, balloon mortgage, endowment mortgage, reverse mortgage, repayment mortgage, jumbo mortgages, seasoned mortgages, wraparound mortgages, and offset mortgages. Each type of mortgage has some feature that makes it different from the others; however the basic concepts remain unchanged.
• Mortgages also vary according to the country and are different in United States compared to other countries such as U.K and Europe. In the United States, the secondary market for mortgages is handled by the Federal National Mortgage Association also known as Fannie Mae. The other entity that deals in mortgages is the Federal Home Loan Mortgage Corporation also known as Freddie Mac that encourages the surge of capital into the housing market by setting up an dynamic secondary market in mortgages.

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