Conditions of a Mortgage

by Andrew Latham
    The conditions of a mortgage stipulate the terms that apply between a lender and a borrower.


    Mortgage loans are an important financing tool in the real estate industry. Without mortgages, many homebuyers could not afford the cost of a home. To illustrate, in the second quarter of 2010, $14 million were outstanding in mortgage debts. It is important to understand the conditions of your mortgage before you commit yourself to avoid fraud and abusive loan terms. The FBI estimates there are $4 to $6 billion annual losses due to mortgage fraud, and according to a Freddie Mac poll, six in 10 borrowers wished they understood the term of their mortgage better.


    The oldest records of mortgages originate from Egypt in the time of the Pharaohs. Since then, people have used mortgages to pay for their homes. The basic method of purchasing and paying for mortgage loans was first created in the 1500s, while mortgages as we know them today first appeared in the 1930s.

    Time Frame

    The length of a mortgage will depend on the term agreed between a lender and a borrower. Typical terms usually range between 5 and 40 years. The longer the term of a mortgage, the more interest the borrower will pay. Shorter mortgages, however, will usually have higher monthly mortgage payments. Find the shortest mortgage term you can afford to save on interest payments.


    The conditions of a mortgage vary by lender, country and state. They can include advance fees, closing fees, interest payments, prepayment penalties, taxes and insurance fees. Lenders also require borrowers to meet eligibility conditions to qualify for a loan. These requirements include income level minimums and maximums, loan-to-value rates, and debt-to-income rates.


    The conditions of a mortgage allow lenders and borrowers to do business with a clear understanding of the terms of the contract. These conditions protect the interests of both parties by allowing lenders to make a profit from selling loans while protecting the rights of borrowers. For instance, you must pay your mortgage payments or lenders can foreclose on your mortgage and repossess your home. This provides lenders with some protection from the risk of lending. On the other hand, legal conditions on mortgages regulate how borrowers are treated by lenders. For instance, the State of California requires lenders to have a comprehensive loan modification program to help borrowers avoid foreclosure.


    Mortgages are categorized by the type of conditions offered by the lender such as the type of interest, term and cost. For instance, you can choose a fixed-interest mortgage, variable-interest mortgage or an adjusted-rate mortgage. You can also apply for a prime mortgage, which has lower interest rates and more favorable mortgage terms, if you meet your borrower's criteria or settle for a subprime mortgage if you are not eligible for a prime loan.

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