Largely from the Handbook of Mortgage-Backed Securities by Fabozzi Mortgages are an important source of funds more most homeowners. Mortgages themselves are simply debt instruments that have property, generally real estate, pledged as collateral.
Mortgages can take on many shapes and forms.
However, most have certain things in common. Generally, mortgagees make monthly payments of both interest and principal. The early years of a mortgage are dominated by interest payments whereas the latter payments are more heavily weighted towards principal. If yo are uncertain of how the cash flows look, consider the following spreadsheet example . Traditional providers of mortgages are banks and savings and loans.