REAL ESTATE FINANCIAL TERMS
3
An advantage as well is the only real disadvantage being maintaining timely and accurate
records.
Mortgage
A mortgage is a legal agreement that has significant importance to a borrower and a
lender.
The document pledges property as security for a loan that is provided by a lender.
To a
buyer is has significant importance because it allows them to finance the purchase of real
property.
It is important to a lender because it allows them to make interest income and to have a
security in their investment.
Real estate agents play a role in this document as well because they
facilitate a relationship between the two parties.
There are a few advantages to utilizing a mortgage for both parties.
Having a mortgage,
for example, allows a buyer to purchase a property without having to pay the entire cost upfront
so the advantage is homeownership is possible for many people[ CITATION Nic20 \l 1033 ].
It
allows lenders to make an income by charging an interest rate on the mortgage and to secure the
mortgage with the property to protect them from loan default.
A major disadvantage to having a mortgage is a borrower will end up paying back a
significant amount of money more than what was initially borrowed[ CITATION Nic20 \l 1033 ].
This is because of an interest being charged on an amount for a long term, in most cases a 30-
year note.
Another disadvantage is that mortgage payments my change because of rising tax
costs and if the mortgage is a variable loan it will change as interest rates change.
A possibility
of having negative equity could occur if the housing market drops and the costs of real property
reduce.
The last major disadvantage is that in order to get a mortgage a borrower may have to
have a large amount of money that will have to be paid up front during closing[ CITATION
Nic20 \l 1033 ].
In some cases, this could be several thousands of dollars that may not be
