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The World of Mortgages

By Steven Cancel

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Published: 09Jun2007
Word count: 515
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Buying a home is usually a very overwhelming and big event in a person or a couple's life. It takes lengthy considerations and life searching to find out if you are ready to do so. One thing people will most definitely need is the money to buy a home which in terms of home prices, people don't generally have that much saved up.

Everyone wants to own a house, it doesn't matter what country you live in. What most middle class type people will need is a home loan, and home loans are different in each country. If you think you know a lot about home loans in America, you could go over to the United Kingdom or Germany and expect to know everything but come to find out that everything isn't the same over there.

In each country around the world, a mortgage is usually different. In the United States, to get a loan you must have a down payment, which is a percentage of what you are borrowing that is regulated by the company you get the loan from. In Germany, the borrower has to have at least 15 - 20% of the entire loan amount with him to take a loan.

One of the main things that differentiate the United States and other countries is that the U.S. mortgage market is backed up by a very well maintained secondary market in which global investors keep local lenders aware of money. They do this most through large secondary entities like Fannie Mae and Freddie Mac. These are government-sponsored enterprises to make sure lenders always have money to lend, even during periods of high interest rates, and private conduits that perform the same function.

In Great Britain, they have variable-rate mortgages, or a floating rate mortgage. A mortgage loan where the interest rate on the note is periodically adjusted based on an index. This is done to ensure a steady margin for the lender, whose own cost of funding will usually be related to the index. Consequently, payments made by the borrower may change over time with the changing interest rate.

In the UK, Germany, and the States, citizens pay interest on top of what they owe back to the lender. In Muslim countries, Muslims mortgages get a little tricky. The Sharia law of Islam prohibits the payment or receipt of interest, which means that practicing Muslims cannot use conventional mortgages. Because real estate would be way too expensive to just use regular cash. Islamic mortgages solve this problem by having the property change hands two times. An example would be as if the bank bought the house and act that the existing landlord to the person who wants to live in the house. The person will pay rent and in addition will pay contribution towards the purchase of the property. When the last payment is made, the property changes hands.

No matter where you are in the world, getting a mortgage will always be a struggle. When that house is finally yours, the feeling of having the house will be worth it.

This article was written for our friends at Darlehen to explain the differences in mortgages around the world. Article written and distributed by Steve Cancel, IT Manager of Computer Repair Michigan.

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