Mortgage Rate

 

A mortgage can be defined as a temporary or conditional pledge of one’s property to a creditor as a security for performance of an obligation or repayment of a debt. There is usually a contract deed specifying the terms of the mortgage which defines rights of the mortgagee upon the mortgaged property.

 

A mortgage can be defined as a temporary or conditional pledge of one’s property to a creditor as a security for performance of an obligation or repayment of a debt. There is usually a contract deed specifying the terms of the mortgage which defines rights of the mortgagee upon the mortgaged property.

In terms of investment analysis, mortgage refers to a debt instrument secured by collateral of specified real estate property that the borrower is required to pay back with regular loan amortizations. Mortgage or “mortgage loan” is similar in this context and is generally resorted to by individuals or large companies to purchase residential or commercial real estate properties. Various mortgage companies such as CTX, Ameriquest and ICICI Lombard are renowned mortgage companies worldwide. In legal banking terms as well as in economics, mortgage transfers the interest in the property and gives conditional ownership of the asset, the mortgage loan secured by the asset being financed. The mortgage property is discharged upon repayment of the debt.

Today mortgages are widely regarded as liens to property which is the broadest term for any encumbrance to ones personal or real property secured against the performance of any obligation. However, both are the same in effect as the creditor can appropriate the property in event of default of payment and sell it to realize the proceeds.

In terms of the mortgage rates charged by the major mortgage companies, there are mainly two types; the Fixed Rate Mortgage (FRM) and the Adjusted Rate Mortgage (ARM). The FRM rates on mortgages remain the same over the tenure of the debt which with interest rates a bit higher than 30 year treasury bonds at the time the mortgage is issued. The mortgagee is required to pay the interest on the mortgage or the mortgage rate and a little bit of the principal with the interest on the principal falling over time. In case of the ARM, the mortgage rate may change in response to the Treasury Bill rate or the Prime Rate.

ARM is structured so as to follow market rates with a maximum ceiling rate which cannot be exceeded. ARM’s generally start with lower mortgage rates in order to accommodate future risks out of interest rate fluctuations. While 30 year or 15 year fixed mortgage rates hover around 5%-5.5%, 30 year fixed jumbo mortgage rates is around 6% and ARM is still around 5.5% for most US states. In case of Canada, mortgage companies such as Bank of Montreal, Bank of Nova Scotia, Royal Bank, National Bank, HSBC Bank Canada and Home Trust Company mortgage rates go up progressively from 6.5% to 7.5% as repayment periods extend from 6 months to 1 year and eventually up to 10 years.

Mortgage rates can also be “Prime” in nature. Prime rates are the lowest interest rates offered by mortgage companies to their most credit-worthy borrowers. It is not similar to long-term mortgage rates although it may influence them. It should be noted in this context that mortgage loans are structured as long term loans and are based on time value of money formulae. Mortgage rates can be Prime in nature and it refers to rates offered by mortgage companies to corporations who are considered excellent risks.

Mortgage refinance rates can be availed from various companies who offer lower mortgage rates than first time mortgage loans. Mortgage refinancing can be very beneficial for those having good credit histories who can get their properties mortgaged at lower mortgage rates. With sufficient savings on the new mortgage loan, one can pay off the debts on the previous mortgage loan using the same property as collateral.

Some of the companies offering the best mortgage rates are:mortgageloanoutlet.com
bankrate.com
Fannie Mae
Ginnie Mae
ABN AMRO
HSH Associate
ICICI Lombard

In the context of India, the mortgage financing industry was estimated at US $18 billion in India recently. It is mainly dominated by the housing finance sector. Some of the top players in the organized housing finance sector include the Housing Development Finance Corporation (HDFC), the Industrial Credit and Investment Corporation of India (ICICI) and the State Bank of India although some Non Bank Finance Corporations also have a significant contribution to the growth of the housing finance sector in the recent years. The mortgage rates are set on a fixed or floating rate basis varying between institutions in the range of 12.5% to 16% with loans being offered for 15 years although some of the mortgage companies extend the mortgage tenure up to 20 years or more.