Mortgage Loan: What is it?
                     MORTGAGE LOAN: WHAT IS IT? 
UNDERSTAND TYPES AND PROCESSES
INTRODUCTION
A mortgage, also referred to as a mortgage 
loan, is an agreement between you (the 
borrower) and a mortgage lender to buy or 
refinance a home without having all the 
cash upfront. 
This agreement gives lenders the legal 
rights to repossess a property if you fail to 
meet the terms of your mortgage, most 
commonly by not repaying the money 
you’ve borrowed plus interest.
Source: www.rocketmortgage.com
WHO GETS A 
MORTGAGE?
Most people who buy a home do so with a 
mortgage. A mortgage is a necessity if you 
can’t pay the full cost of a home out of 
pocket.
Source: www.rocketmortgage.com
DIFFERENCE BETWEEN A 
LOAN AND A MORTGAGE?
The term “loan” can be used to describe any 
financial transaction where one party 
receives a lump sum and agrees to pay the 
money back.
A mortgage is a type of loan that’s used to 
finance property. A mortgage is a type of 
loan, but not all loans are mortgages.
Source: www.rocketmortgage.com
HOW DOES A MORTGAGE 
LOAN WORK?
When you get a mortgage, your lender gives 
you a set amount of money to buy the 
home. You agree to pay back your loan – 
with interest – over a period of several 
years. The lender's rights to the home 
continue until the mortgage is fully paid off. 
Fully amortized loans have a set payment 
schedule so that the loan is paid off at the 
end of your term.
Source: www.rocketmortgage.com
TYPES OF MORTGAGE
• Simple Mortgage: A simple mortgage is an 
agreement that if the borrower is unable to repay 
the loan in full, the lender can sell the property 
that was offered as collateral and recover their 
amount. 
• Usufructuary Mortgage: In this case, the property 
is transferred to the lender, who can then earn 
profits from the same. Usufructuary mortgage 
usually does not offer full ownership but rather a 
temporary right.
• Sub Mortgage: If a prospective borrower has a less 
than ideal credit history or a low credit score and 
the lender would like to offer a loan, they tend to 
do so at higher interest rates.
Source: www.idfcfirstbank.com
MORTGAGE LOAN PROCESS
STEP 1
The process of applying for a mortgage, or a 
loan against property, is broadly similar 
across all available avenues. Before starting 
your mortgage loan process, make sure that 
it is the right option for you. Different banks 
will offer different repayment tenures, 
interests, and so on. Researching your 
options beforehand is essential.
Source: www.idfcfirstbank.com
STEP 2
Once you shortlist the banks you can apply 
to, check their eligibility criteria and 
application requirements. If you are eligible, 
gather all the required documents. 
Source: www.idfcfirstbank.com
STEP 3
It usually includes your proof of identity, 
address, and income, as well as come 
property-related documents. Some banks may 
offer the option to apply online, but in most 
cases, you may be able to visit the nearest 
branch.
The application may take anywhere between 
three to 10 days, depending on your eligibility.
Source: www.idfcfirstbank.com
HOW DOES YOUR MORTGAGE 
IMPACT YOUR CREDIT 
SCORE?
A mortgage loan will have some effect on 
your credit score. However, whether it 
reflects positively or negatively will depend 
on how well you handle the loan and 
repayment.
Source: www.idfcfirstbank.com