Loan against mortgage or property is one of the most preferred forms of long-term financing, both in corporate finance and in personal finance. There are various extra edges given by mortgage loans to the borrowers and the lenders, making it almost an evenly distributed type of debt. On occasions of common explanation, mortgage loans are also nicknamed as good loans due to the benefits it bestows upon both the sides.
Benefits outshine the burden of a loan
In corporate finance, it is a safe kind of large-scale lending in which the company is answerable only to the lender. The payment or non-payment affects the company owners rather than the shareholders or the corporate board. The only extra payment made is the interest given to the lender for the loan. In case of non-payment, the only loss is the property provided as security for the loan.
On the other hand, in other forms of long-term financing like an initial public offering, the company becomes answerable to all the shareholders for every decision. According to the investment in the individual shares, each shareholder has to be given a percentage of the profit earned in the respective quarter.
In case of personal finance, mortgage loans are a kind of ‘dream-fulfiller’ as they give the borrower the realization of the biggest dreams, such as owning a house, an apartment, buying a commercial property, starting a Crypto VIP Club etc which otherwise would not have been possible for him. In another way, if you are lending against a house which has been given for rent, you can still continue to get the rent in your hands. The only payment you have to give the lender is the Equated Monthly Installment or EMI. You do not transfer the ownership rights to the lender unless you become a serious defaulter.
Another important feature of mortgage loans which goes in the favor of the borrower is the relation in the tax payments. These loans are again, one of the biggest sources of tax reduction, covering two big sections of taxation. The borrower gets the biggest deduction on account of both the principle and the interest and he gets some respite from the pain of giving away a major chunk of his returns on the toil to the authorities.
Mortgage loans are a kind of safe loans in the sense that the parties on either side of the loan system do not fall into an economic loss because of lending or borrowing such a huge sum. If the lender gets the interest calculated based on the inflation rate for such a long span and can redeem it in case of defaulting by auctioning off the property. The borrower need not worry about paying the interest, because the total amount payable after the huge repayment duration sometimes maybe even less than the inflated price of the property. This is indeed a ‘secure loan’.