Building society is a specialist savings bank. The main function of a building society is to attract savings from the public, and to lend the savings to people who wish to buy homes. Loans are made through legal agreements called mortgages. Generally, mortgages are repaid over a long period, such as 20 or 25 years. The building society holds the title deeds of the borrower’s house as security until the loan is repaid. Borrowers repay the mortgage in regular amounts, generally making monthly payments. If a borrower fails to keep up regular payments, the building society may repossess the house.
In addition to repaying the loan, borrowers have to pay interest on the amount borrowed. Most of the interest is paid by the building society to its savers—that is, the people who have invested money in the building society. The remainder pays the society’s expenses and forms its profits. Many building societies in the United Kingdom and Ireland are cooperatives, jointly owned by all the savers whose money is invested in them. In some countries, organizations similar to building societies are called cooperative banks. In the United States, such financial institutes are called savings and loan associations.
