Mortgage vs Merchant Bank: Difference and Comparison

The bank is a financial institution which plays the role of a financial mediator between the Depositor and the withdrawer. Besides accepting deposits and lending loans, it provides many other services to the public and the business.

Mortgage and Merchant banks are those institutions which provide financial services and consultancy, Underwriting, Funding and loan to the business and real estate purchases.

Key Takeaways

  1. A mortgage is a loan secured by real estate property, where the borrower agrees to repay the loan with interest over a specified period.
  2. Merchant banks provide specialized financial services to businesses, including corporate advisory, underwriting, and raising capital through debt or equity offerings.
  3. Mortgages are a specific type of loan focused on real estate financing, while merchant banks offer businesses a range of financial services.

Mortgage vs Merchant Bank

The difference between Mortgage and Merchant Bank is that Mortgage is a bank or company which offers a loan with their funds or from warehouse lenders. A merchant bank is an institution that provides finance, underwriting, business loans, and advice or consultancy on finance.

Mortage vs Merchant bank
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A mortgage is a bank, company, individual or institution specialising in mortgage loans. A mortgage bank never holds any deposit; it originates and services the loan.

A merchant bank is a financial institution that offers Financial Services or Advisory, underwriting and business loans.


 

Comparison Table

Parameter of ComparisonMortgageMerchant Bank
FunctionalityIt is originating and mortgaging loans, mainly mortgaging own fundsFinancial consulting for business, which may include business loans and advice.
Services toIndividuals or Businesses use Mortgage mainly for real estate purchaseFinancial Advice to multinational companies and Businesses and other services also
EarningMortgage sells its mortgage at a premium on the secondary marketMerchant bank provides service of Consultancy on business and finance
Governing ActAs per NMLS and SAFE ActFollows the SEBI guidelines
RiskMortgage bankers face less riskCompared to Mortgage More

 

What is Mortgage?

A mortgage is a bank, company, individual or institution that offers loans to individuals or businesses that want to use the funds to make large real estate purchases.

Mortgage never collects deposits from the public and holds; it originates and services loans on its own. The primary source of revenue for the mortgage bank is ‘mortgage originating fees or servicing fees’.

Suppose the mortgage borrower cannot repay the amount or interest in a certain period assigned. The mortgage bank has the right to occupy the house and sell it.

In other words, a mortgage can also be called a home loan. It has many forms; a mortgage can be avail to the borrower by adding some interest rate and years to complete repayment mortgage.

Fixed interest mortgage is interest fixed for the whole period of repayment of the mortgage, and there are no changes in any situation. Even when the economy downfall or rise.

mortgage
 

What is Merchant Bank?

A merchant bank is a bank that provides services to the client like fundraising, loans, underwriting, making a market for companies in the business world, finance advising or guiding companies and individuals who have a vast network.

A merchant bank is not meant for the general public as it is not providing any essential services as banking provides, like collecting deposits or checking accounts.

Suppose a multinational company wants to purchase a small company in another country and approaches a Merchant bank for Advice. In that case, a Merchant bank offers advice on the best way to approach an acquisition process, and it may also assist with providing loans and underwriting.

Some of the Services or Functions of a Merchant bank are,

  1. Equity underwriting
  2. Portfolio management
  3. Issue management
  4. Project council

Merchant bank provides loans to projects and invests in a different form of investment on behalf of its client and manages on their own.

merchant bank 1

Main Differences Between Mortgage and Merchant Banks

  1. The main difference between Mortgage and Merchant Bank is that the former functions by offering loans from its funds or procuring them from a warehouse lender. The latter is a financial institution that provides services on finance as consultancy services.
  2. A mortgage company or bank provides services to mortgage Individuals or Businesses to make a large real estate purchase.
Difference Between X and Y 2023 04 06T115427.864

References
  1. https://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=4656&context=ylj
  2. https://commons.stmarytx.edu/cgi/viewcontent.cgi?article=1396&context=facarticles

Last Updated : 11 June, 2023

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11 thoughts on “Mortgage vs Merchant Bank: Difference and Comparison”

  1. The detailed comparison table made it much easier to understand the differences between Mortgage and Merchant Banks.

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