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.
- A mortgage is a loan secured by real estate property, where the borrower agrees to repay the loan with interest over a specified period.
- Merchant banks provide specialized financial services to businesses, including corporate advisory, underwriting, and raising capital through debt or equity offerings.
- 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.
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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.
|Parameter of Comparison||Mortgage||Merchant Bank|
|Functionality||It is originating and mortgaging loans, mainly mortgaging own funds||Financial consulting for business, which may include business loans and advice.|
|Services to||Individuals or Businesses use Mortgage mainly for real estate purchase||Financial Advice to multinational companies and Businesses and other services also|
|Earning||Mortgage sells its mortgage at a premium on the secondary market||Merchant bank provides service of Consultancy on business and finance|
|Governing Act||As per NMLS and SAFE Act||Follows the SEBI guidelines|
|Risk||Mortgage bankers face less risk||Compared 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.
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,
- Equity underwriting
- Portfolio management
- Issue management
- 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.
Main Differences Between Mortgage and Merchant Banks
- 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.
- A mortgage company or bank provides services to mortgage Individuals or Businesses to make a large real estate purchase.
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.