Capital mortgage funding includes providing a loan to consumer that includes two parts of a payment schedule-a capital and a interest payment.
The loan that is provided to a consumer for a capital mortgage funding loan is a mortgage. A mortgage gives a consumer the opportunity to acquire ownership of a property that is offered for a purchase price. A typical capital mortgage funding loan is usually written for a 30 year period. The loan is financed through a financial institution, another 3rd party or a private investor and these funders are called lenders. The lender sets up the terms and conditions for the capital mortgage funding. The terms and conditions include: the amount of the loan, interest payment schedule and maturity and payoff date and obligations.
Once a capital mortgage funding loan is made, the consumer which now becomes the borrower must begin monthly payments for the life of the loan. A borrower is defined as an individual or an entity that is asking for money to obtain ownership in a property or an investment. As stated before, the payment has two parts-capital and interest. The capital refers to the amount of principal that is owed on the capital mortgage funding loan. Principal is defined as the amount that the original loan was written for without other costs added into the base amount. The idea behind a mortgage is that the principal will be paid down throughout the life of the loan. In regards to interest, the interest refers to the amount of money owed to the lender for the administration of the loan. At the start of the capital mortgage funding loan, the amount of capital is smaller compared to the amount of interest. Over the life of the loan, the amount of capital owed decreases whereas the amount of interest owed decreases.
When a borrower, does not want to apply for capital mortgage funding, there is another option available. This option is widely used in the UK. The borrower can apply for an interest only mortgage. This type of loan does not have a capital payment schedule. Instead, this loan is combined with another type of investment plan. When a borrower uses an interest only mortgage, the loan is called “investment-backed.”
With recent economic woes affecting the mortgage industry, some borrowers encountered a problem with defaulting on their capital mortgage funding loan. Due to financial constraints, borrowers have been unable to make monthly payments. Underneath the terms of the loan contract, the lender has the ability to try to recover some of the lost money by putting a lien on the property or possibly initiating the foreclosure process on the property.