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A mortgage is a secured advance of funds for the purchase of an asset such as a home. Mortgages originated as a way to circumvent onerous laws against borrowing. The debt is secured with title to the asset. Mortgages allow the borrower to spread the acquisition of a major asset, such as a home, over a period of 20 years or so.
For most people, a mortgage is the largest debt incurred in a lifetime. At the same time, a home purchased with a mortgage may be the largest single asset. As a result, the impact of a mortgage on financial planning strategies needs to be considered carefully. Different mortgage payment options to provide liquidity and flexibility should be considered, as they permit the mortgage to be more customized to an individual’s requirements.
Mortgages were once relatively generic with few or limited options, but today there are many types of mortgages and options available.
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