Mortgages Are: Definition, Types, and Their Functions

If you want to own a home but don't have the money needed to do so, a home mortgage, also known as a mortgage, is a great option. Therefore, it is very important for you to know what a mortgage is. 

Everyone knows that house prices are getting more and more expensive. In a way, the mortgage credit line makes it easier for everyone to own their own home. What is a mortgage? What are the types? What does it do for us?

To allay your curiosity, we will explain each aspect in detail below. Come on, read the article below to the end!

Definition of mortgage

One way to repay a house with interest and a certain period of time is a mortgage, also known as a mortgage. To make it easier to understand, you only need to prepare a down payment (DP) as a condition for applying for a mortgage, and after that process, you can repay the rest within a certain period of time.

The bank also asks for several additional requirements from prospective customers who wish to apply for a mortgage, including the tenor and interest rate. A house is a very important asset for everyone, so if you are planning to buy a house right now, you can try applying for a mortgage from the bank.

According to Bank Indonesia (BI) data from the fourth quarter of 2019, 72% of home financing uses mortgages (KPR). This figure is much higher than twenty percent installments to developers and cash installments of eight percent. 

In addition, financing in installments to developers usually has a short tenor, usually only 5 years. Meanwhile, people tend to avoid cash payments to avoid the risk of failed wake-up calls or delays, especially during a pandemic like today. As a result, mortgages are still a popular choice for many people.

Mortgage type

1. Subsidized mortgages is a loan given to lower-middle-income people to meet their housing needs or improve their existing homes. 

Subsidies ease credit and increase funds for building or repairing houses. Subsidies are specifically regulated by the government, so that not all people who apply for credit can receive this facility. 

In general, the government limits the amount of credit that can be granted and the applicant's income.

2. Non-subsidized mortgages is a type of credit given to the whole community, with conditions set by the bank. The bank's policy regulates the amount of credit and interest rates.

3. sharia mortgage, in general, sharia mortgages are no different from non-subsidized mortgages; the only difference is that the system is based on Islamic religious principles.

This product is usually offered by Islamic banks that do not use an interest rate system because interest is often seen as usury. The profit sharing system or ratio is used by Islamic banks as a substitute for the previous system.

One of the advantages of sharia mortgages, according to Mike Rini Sutikno, a financial planner, is that the installments are fixed and do not change until the expiration date because sharia mortgages do not use the bank's fluctuating interest system.

4. mortgage refinancing is a type of mortgage that is different from the others.

If you are having difficulty settling your ongoing mortgage debt, refinancing a mortgage is a great choice. You can transfer the rest of your mortgage repayments at the old bank to the new bank through refinancing. The new bank will help you pay off the remaining installments. You have to pay the remaining installments at the new bank with lower interest than the previous bank.

5. Tiered installment mortgages is an additional option that can help you reduce your mortgage payments. One of the advantages of this program is the ability to postpone payment of partial principal installments until the third year of the loan term. In year four, new installments will return to business as usual.

6. Take over mortgage is a payment program that has been submitted to one bank and then transferred to another bank that is considered profitable by the customer. If you want to change the type of interest rate and don't mind paying installments, this type of mortgage is a great choice.

7. Purchase mortgage, you can get a new home by applying for a loan to the purchase mortgage program. The house he bought is his guarantee.

8. double mortgage is this type of mortgage is very rare. This mortgage is used to buy everything from cars, motorcycles, and furniture to apartments and shophouses.

Mortgage function

Fulfilling housing needs can be assisted by the following KPR functions:

Mortgage to buy a house

You can buy a new home by applying for a loan or mortgage to a purchase mortgage program. With this program, you can buy it and the house will be guaranteed.

Mortgages for home renovations

Both private and state-owned banks in this country offer mortgage facilities for home renovations. However, each bank has different advantages and conditions. 

Several types of housing loans that you can apply for include multipurpose loans, where you only need to provide capital in the form of collateral or collateral. If you want to apply for credit to repair a house, you can provide land certificates as collateral.

Mortgage to buy land

If you want to buy a plot of land but don't have enough funds, KPT (Land Purchase Credit) is an option that you can use. Applicants who wish to purchase land or plots of land will be given bank options such as installments, loans, or financing. 

This service product is similar to a home loan. It's only the items they buy that make a difference. Land credit is usually given to vacant land that has not yet been built.

KPR for shop ownership

With the KPR Purchase program, you can also buy additional properties such as shop houses or shop houses. The shophouse will be the guarantee after the purchase takes place.

Mortgage to buy an apartment

Many people find it difficult to get apartments due to increased demand. By applying for an Apartment Purchase Credit (KPA), you can get a cheap apartment unit even though you have a low salary. 

Now, you can apply for a mortgage from a private or state-owned bank with a cheap down payment and easy installments. KPA can usually provide financing ranging from 70 to 80 percent of the price of the apartment. In contrast, credit duration ranges between 5 and 20 years. Take advantage of applying for a KPA, such as low interest rates and lenient installments, among other things.

Take over mortgage

Basically, transfer of credit applications (KPR) is a transfer from the initial credit application bank to another bank that can benefit the customer. This type of mortgage is perfect for those of you who want to change the type of interest rate so that your installments don't become a problem.

That was an explanation about mortgages, as well as their types and functions for prospective customers. Hope it is useful!