Mortgage Loan

A mortgage loan is a loan secured against property. The security is usually the residence of the borrower or an investment property, however, commercial property can also be used. The maximum loan amount against residential property is 80% of its value whilst with commercial property the maximum is usually 70% of its value. On occasions it is possible to purchase more than 80% against residential property, however, in these cases, mortgage insurance is required which can be very expensive and difficult to obtain.

The interest rates that are available with mortgage loans are the most attractive when compared to loans secured against a business. The term of the loan is also more flexible and can usually be obtained for terms up to 25 years. Loans can be obtained on a reducible basis(principal and interest) or on an interest only basis where only the interest is repaid whilst the amount borrowed does not reduce .

It is quite common that when a mortgage loan plus a business loan are used to purchase a business, that the mortgage loan is taken on an initial five year interest only basis so that most of the surplus funds from the trading of the business can be channeled to accelerating the repayment of the more expensive business loan.