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Primary & Secondary Mortgage Market

Primary Mortgage Market is a place where a primary lender (The Bank) grants a loan to a borrower in need (Mr. Sharma). When the lenders run out of money to lend out other borrowers, they sell a bunch of loans with similar properties to an investor (Ms. Patel) in the Secondary Mortgage Market and thus continue to lend money to borrowers. https://www.celusion.com/<br>

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Primary & Secondary Mortgage Market

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  1. CELUSION Let’s tell you the story of the Primary Mortgage Market & the Secondary Mortgage Market.

  2. CELUSION Mr. Sharma is a borrower who seeks a loan of Rs. 50 Lakhs. He goes to the bank, meets Mr. Mehta (lender) for the loan. Hello, Mr. Mehta Hi, Mr. Sharma

  3. CELUSION The Bank agrees to grant a loan of Rs. 50 Lakhs to Mr. Sharma after checking his qualifications. Mr. Sharma signs a loan agreement agreeing to pay back the amount at 7.5% interest in the next 30 years.

  4. CELUSION The Bank makes money by charging Mr. Sharma a fee of the loan amount’s 1% (in this case, that is Rs. 50,000). This is how loan origination occurs as a part of the Primary Mortgage Market.

  5. CELUSION Now, after giving out ample loans, The Bank realizes they don’t have funds left to lend. At this stage, The Bank stacks a bunch of loans they have granted and takes them to the Secondary Mortgage Market.

  6. CELUSION The Bank visits an investor in the Secondary Mortgage Market, Ms. Patel. The Bank sells the bundle (typically with similar loan amounts and interest rates) to Ms. Patel. Now the Bank is replenished with funds to originate more loans in the Primary market. Hello, BANK Hello, Ms. Patel

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