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What is a mortgage in Uganda Kampala

Posted by Musbon RealEstate on May 1, 2023

What is a Mortgage in Uganda Kampala-; Looking to buy a house In Uganda but want to get a mortgage or looking to mortgage your current property but don’t understand what a mortgage is?, We at musbon real estate have put up this article to guide you and we hope it answers all your questions about what a mortgage is. For houses on sale through mortgage in Uganda , visit Musbon Real Estate website 


A mortgage loan is an agreement that gives the lender the right to forfeit the mortgaged property or assets in case of failure to repay the borrowed sum and interest. An asset or real estate secures them. These types of loans are considered relatively safe as an asset secures them.

The lender has the right to sell the property to cover expenses due to the borrower’s inability to pay. Therefore, the lender’s associated risk can be low as long as the amount of loan sanctioned is less than the calculated value of the property.

Mortgage Explained in detail

Mortgages work similarly to other loans. It provides a borrower with a specific amount of money for a particular period, which they should be then repay with interest. However, mortgages differ from other loans, such as personal loans or student loans. They have secured loans secured by an asset or real estate. As a result, the lender obtains a hold over it and can foreclose if the borrower doesn’t pay.

People use mortgage loans to buy any real estate or borrow money against the property’s value already owned. The property provided acts as collateral for the loan taken. The lender will assess the value of the collateral provided to let the borrower know how much they are qualified to borrow. A simple online search can reveal the mortgage rates offered by different financial institutions. Similarly, individuals can use online calculators to calculate mortgage payments. Borrowers can also contact a mortgage broker to save time and effort during the application process. They are intermediaries who connect the borrower with the lender. However, as a precaution, the borrowers must go through the varied mortgage loans available and choose the best. This will save a lot of money by way of interest.

Types of Mortgage

Given below are some of the common mortgage types:-

Fixed-rate mortgages

Fixed-rate mortgages have fixed interest rates. The interest rate will remain the fixed or same as when the borrower took the loan. Hence, institutions will not alter the rates.

A mortgage with an adjustable rate (ARM)

ARMs have lower interest rates, to begin with than fixed-rate mortgages. This initial rate could remain constant for months, years, or years. Interest rates will change when the introductory period ends, and the amount due will most likely increase. A portion of the interest rate paid links with an index, which is a broader measure of interest rates. When the interest rate index rises, the payment also increases. When interest rates decrease, institutions may reduce payments. Some ARMs have a maximum and minimum interest rate cap that borrowers can pay.

The closing costs of the loan

If the borrower decides to close the loan before the lending tenure, the institution may charge an additional fee to cover the loss of interest. The lender shall also consider other payments, such as the lender’s fee on closure.

The annual percentage rate

The annual percentage rate estimates the proportion of the principal the borrower pays each year by factoring in items like monthly payments. It is a broader measure of the cost of borrowing money than the interest rate. It includes all the reflects the interest rates, fees, and related charges that the borrower need to pay to secure the loan. For that reason, your APR is usually higher than interest rates.

The type of interest rate

Whether the interest rate that the borrower has to pay is static or flexible. Each has its perks and the borrower chose it according to their wish.


Who Provides Mortgage Loans?

Mortgage loans are often made by banks and other traditional financial institutions (like credit unions), but not always.

Life insurance companies, pension funds, and other large asset management firms also have mortgage lending arms. In fact, mortgage loans (from the lender’s perspective) tend to represent very stable and consistent sources of future cash flows by way of the borrower’s monthly payments.

Mortgages are also issued by other private investors (both individual and institutional); these parties pool funds into various forms of mortgage trusts to create private lending entities. These funds are often deployed to homebuyers and real estate investors by way of mortgage brokerage companies.


A mortgage broker is not themselves a direct lender. A borrower will generally enlist the services of a mortgage broker to help them “shop around” to all the previously noted mortgage lenders in order to secure the best rate and terms for their borrower. The broker is typically paid by the lender that closes the deal.

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