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Welcome back to our series
on Real Estate Economics.
This is talk number eight,
and the first talk on
the general topic of
real estate finance.
I'm John McDonald.
I'm an Emeritus
Professor of Economics
at the University of
Illinois, Chicago,
and an Emeritus
Professor of Real Estate
at Roosevelt University.
The topic for this session is
Mortgage Loans for Real Estate.
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We'll be covering what
is a mortgage loan,
what types of loans
are out there,
how do the loans
work, and finally,
what could go wrong
with that whole scheme?
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What is a mortgage loan?
A mortgage loan is a loan
with a lender and a borrower.
The contract specifies the
amount of the loan and
the procedures for
paying off the loan.
The borrower pays
monthly and so on.
The amount of the loan
is the principal,
and the borrower pays back
the principal and pays interest.
The mortgage pledges the
property itself as collateral.
I want you to understand that
a mortgage is what the
borrower gives to the lender
pledging the property
as the collateral.
In other words,
if the borrower fails to meet
the terms of the contract,
i.e. doesn't pay,
then the lender can initiate
a foreclosure process
to take possession
of the property.
And that, depending
on where you are,
it could be a court procedure or
it could simply be a law that
the lender can exercise.
