InvestorQ : How mortgage is beneficiary for the first party?
Shivangy chowdhury made post

How mortgage is beneficiary for the first party?

3 years ago
A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. With a fixed-rate mortgage, the borrower pays the same interest for the life of the loan. A mortgage has two parties - One who takes the money and keeps some asset as mortgage and another person who keeps the asset and gives money.

Both parties to the contract have benefited from this arrangement.
First-party (who takes money): This person gets a lump sum amount from the other party for fulfilling the need and pays fixed interest thereon.

Second-party (who gives money): This party has most of the benefits out of this arrangement even though they have to pay the money. They have some security which covers the substantial amount of loan given, and sometimes even exceed the loan amount. Receives fixed and regular interest on the loan given and if the person who took the loan failed to repay it, the asset legally transfers to the second party.

So, the party who gives a loan is fully secured against the amount given and does not incur huge losses.