What Mortgage Has To Do With Real Estate?

Despite being one of the most aged topics, real estate, still comes as an ambiguous term to several people. To provide a simple definition for real estate, it is a term used to represent land. By land we talk about the physical surface of the Earth, starting from the bottom and heading towards the above atmosphere. Also, the factors either man-made or naturally occurring like trees, water, grass, buildings, etc. associated with the land are all related to real estate. 

The term mortgage is not limited to real estate, but in this blog, we will provide knowledge regarding the link between mortgage and real estate. Read the full blog for more.  

Association Between Mortgage And Real Estate

A Mortgage is one of the terms that branches out from the business. To define, a mortgage is a loan of a heavy amount, taken from a bank or some other mortgage lender to buy a property or to build a home. The return policy is designed such that this heavy amount of loan can be returned in parts on the basis of interest, over a fixed time period. 

To link mortgage and real estate, it is lending of loan specifically for the possession of land, either for residential or commercial purposes. Additionally, if someone fails to meet the deadline of returning the amount back, then the possession will be taken back. In this way, there exists a close linkage between these two individual terms. 

Mortgage Schemes In Pakistan 

In Pakistan, the basic requirement for acquiring a mortgage is the age between 25-57 with a net income of PKR 50,000. If someone is eligible for this criteria, then a mortgage can be taken. Keeping in mind the real estate taxes in Pakistan, various schemes of mortgage financing of real estate, have been introduced. Recently the government of Pakistan is giving ease in mortgage financing through Naya Pakistan Housing Program.

The flexibility of such scheme is particularly incorporated, to uplift the burden of low-income class people to give monthly rents with a feeling of insecurity of temporary house. Apart from this scheme, numerous other schemes are in line to provide a mortgage for property to buy in Pakistan. You can go with any scheme following your current financial position. 

Are Real Estate Projects Offering Mortgage?

To be particular, housing societies of real estate Islamabad, which are newly developing are offering a payment plan, which can be beneficial for a low-income class. But coming towards the mortgage, which is not common among real estate projects. 

For example, Taj Residencia Islamabad has got a highly flexible payment plan with ease of installment policy. In this way, an average person which might not be able to pay a heavy amount at the same time can return the amount in installments. It may not be considered as a mortgage because there is no such policy of loan.  

Mortgage Types

Mortgage extends its definition through several types. These policies are also applied similarly to real estate property. Two of the most common types are described as follows:

• Fixed-Rate Mortgage: Fixed-Rate Mortgage is a policy that provides the mortgagor (requesting for a mortgage), with a certain interest rate, that must be returned in a fixed period. The time may be 15, 20, or 30 years, depending upon the contract. If the period fixed is shorter, then the monthly installment will be high. For a longer time period for the return of mortgage, the strategy is the other way around. The advantage provided by Fixed-Rate Mortgage is that the monthly installment remains the same, throughout return. In this way, the mortgagor can easily take out a fixed amount on monthly basis, adjusting the household budget, simultaneously. 

• Adjustable-Rate Mortgage: This kind of mortgage provides a return policy with certain conditions. It means that the installment in the entire time period of the loan keeps on changes. Because of some factors, the interest rate keeps on fluctuating. That is the reason, the monthly cost of installment changes over time. This might be difficult for the mortgagor to adjust the monthly expenditures along with the changing installment rates. If in a current month the rate is low, there's no guarantee that next month it will remain the same.

From the above discussion regarding mortgage and real estate, we can conclude that numerous opportunities are being offered for property to buy in Pakistan, on loan. If there is proper planning of time frame, and budget, one should surely go for a mortgage. In this way, the dream of having a luxurious living can get a practical form, without any hassle of paying heavy amount together. Also, mortgage types should be kept in mind, while filling the mortgage form at the time of contract.