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Question: How do mortgages and bonds work?

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How do mortgages and bonds work?

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Question: How do mortgages and bonds work?

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Both mortgages and bonds are loans. The sellers (in the bond case, they are called bond issuers and in the mortgage case, they are called lenders) of this financial asset receives a lump sum amount (called the principal) from the buyer (bond holder, or mortgage borrower) at the date of the transaction. In a fixed time period (called the term), the sellers of the assets must pay back some of the loan plus interest periodically until the end of the fixed time period.

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