Mortgage is a form of real estate collateral, in which the borrower receives a loan from a bank or other financial institution, and the real estate acts as collateral for the obligations. The main purpose of a mortgage is to purchase housing immediately without the need for long-term savings.

Key aspects of mortgages:

  • The essence of a mortgage. A mortgage is a legal agreement in which a property (apartment, house or land) is used as collateral for the repayment of a loan. The borrower retains the right to use the property, but cannot sell or give it away without the bank’s consent and until the loan is fully repaid. For example, a young family buys an apartment worth 10 million rubles, paying 2 million rubles as a down payment and the remaining amount as part of a 20-year mortgage loan.
  • Parties to a mortgage transaction. The lender is a bank or other financial institution that provides a loan. The borrower is an individual or legal entity that takes out a loan and undertakes to repay it. The pledger is the owner of the property.
  • Mortgage object. The collateral may include residential real estate (apartments, houses); commercial real estate (offices, retail premises); land plots.
  • Basic mortgage terms. The mortgage is characterized by a relatively low interest rate and a long loan term of 5 to 30 years. Another important nuance is the minimum amount that the borrower must pay from his own funds (down payment).

Despite the low interest rate, mortgage loans involve significant overpayments, which can exceed the initial cost of the housing by two times. This is achieved due to the long term of the loan: for example, a 30-year mortgage loan with an interest rate of even 5% obliges you to pay 150% of the cost of the housing at the end of the term.