First Mortgage Agreement

Lenders provide funds against real estate to obtain interest and generally borrow these funds themselves (for example. B by borrowing or issuing bonds). The price at which lenders borrow money therefore affects the cost of credit. In many countries, lenders can also sell the mortgage to other interested parties to receive the borrower`s cash flow, often in the form of a security (by securitization). A study by the UNITED Nations Economic Commission for Europe compared the German, American and Danish mortgage systems. German real estate credit companies have reported nominal interest rates of about 6% per year over the past 40 years (level 2004). German mortgage companies are not the same as banks that provide mortgages. In addition, they charge an administrative and service fee (about 1.5 per cent of the loan amount). However, in the United States, average interest rates on fixed-rate mortgages in the housing market began in the 1980s and reached about 6% per year (level 2004). However, the gross cost of credit is well above the nominal interest rate and has been 10.46 per cent over the past 30 years. In Denmark, interest rates have fallen to 6% per year, as in the US mortgage market. Risk and management costs are 0.5 per cent of the outstanding debt. In addition, a purchase tax of one per cent of the client is levied.

[11] Depending on the size of the loan and current practice in the country, the term may be short (10 years) or long (50 years longer). In the United Kingdom and the United States, the usual maximum term is 25 to 30 years (although shorter periods, such as 15-year mortgages, are common). Mortgage payments, which are usually monthly, include a principal repayment and an element of interest. The amount of each payment on the amount of the principal varies over the life of the mortgage. In the early years, repayments are usually interest. Towards the end of the mortgage, payments are usually for the amount of the principal. In this way, the amount of the payment initially determined is calculated to ensure that the loan will be repaid at some point in the future. This gives borrowers a guarantee that if the interest rate does not change, the loan will be charged by maintaining the repayment at some point. Some lenders and third parties offer a twice-time mortgage program to expedite the payment of the loan. Similarly, a mortgage can be completed before its expected end, by paying part or the rest in advance, so-called reduction. [6] These low mortgage rates weigh on the real estate market.

In most legal systems, a lender can close mortgage property if certain conditions occur – mainly non-payment of the mortgage. Subject to local legal requirements, the property can then be sold. All amounts received from the sale (deducted from fees) are applied to the original debt. In some jurisdictions, mortgages are non-refundable loans: if the funds repaid from the sale of the mortgage property are not sufficient to cover unpaid debts, the lender cannot resort to the borrower after the enforcement. In other jurisdictions, the borrower remains responsible for all remaining debts. Islamic Sharia law prohibits paying or receiving interest, which means that Muslims cannot use conventional mortgages. However, real estate is far too expensive for most people to buy them directly with cash: Islamic mortgages solve this problem by changing the property twice as owner.

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