Monday, November 19, 2018

Mortgages and its types

Mortgage is a debt instrument which is secured by the collateral of specified real estate property; the borrower of the loan is supposed to pay back the loan with a predetermined set of payments.

Through mortgages individuals and businesses can make large purchases without having to pay for them at one. Residential mortgages involve a home buyer to have the bank claim on the house, whilst the buyer pays for the mortgage. If the buyer is unable to do so, he might be charged with penalties.

A mortgage loan is basically a loan that is secured by real property, for instance your house. This is usually done through the mortgage note which provides evidence that the loan and the secured property actually exist. Explained below are some forms of mortgages that can be commonly found:

Pre- Approved Mortgages: A pre-approved is basically lets you know before you sign the deal about how much you can actually afford to borrow; based on your pay structure and the wealth you have accumulated. It generally has the longest rate guarantee period that can be extended up to 120 days. For instance, if the interest rates rise, there would be no effect on the rate of a pre-approved mortgage.

Conventional Mortgages: This type of mortgage does not usually have insurance by default and a conventional mortgage loan does not exceed 75% of the purchase price or appraised value of the home, whichever is less.

High-Ratio Mortgage – CMHC Insured / GE Capital Insured: A high-ratio mortgage is usually above 80% and up to 95% of the purchase price or appraised value of the property. These mortgages are insured against loss by CMHC or GE capital, which happens to be a private insurance company.

Fixed Mortgages entail the first debt registered against a property, i.e. a first charge on the property. The first lender has first right on the outstanding interest costs and all the other costs incurred during the process. The second mortgage is a debt after the first mortgage has been registered. Generally the interest charged on second mortgages is higher than the first one.

Open Mortgages allow you to repay the mortgage at any time without a penalty. They are usually available for short term periods of time, for instance 6months to 1 year. These are best for situations which involve selling of the property. Their interest rate is only a little bit higher than that of closed mortgages.

Closed mortgages offer the security of fixed payments for periods of 6 months to 10 years. These sorts of mortgages generally have penalties for late payments.

Then there are the fixed-term mortgages, where the interest rates and other conditions remain constant throughout the term. Some forms of mortgages include, Adjustable Rate Mortgage (A.R.M), Secured Lines of Credit, Equity Mortgages, Multiple Term Mortgages, All-Inclusive- Mortgage (A.I.M) and bridge financing.

You need to check the pros and cons of all the different kinds of mortgages before deciding upon which one of those fits your situation best. Keep the interest rates and other conditions in mind whilst choosing the type.

By: Nancy Suzan 


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Wednesday, October 10, 2018

Mortgage Prepay and Other Terms You Must Know

Mortgages can confuse even the most financially savvy person, so it is necessary for you to educate yourself on the various terms that are used while getting mortgages. This article talks about these terms and what they mean.

In the event that you may have extra money in your budget at the end of the day, using it to pay off the mortgage is a good idea. This will surely reduce the loan that you have for whatever your purpose is and depending on the amount of the money you pay every month, this could lessen the time of payment to years or even months and the most important is that the interest rates in the principal loan will be reduced. But in paying, you should consider some factors such as mortgage prepay and other things that gives a negative effect to your loan.

So if you are planning to have a mortgage loan, you should first be aware of the terms that the lending companies are using in order for you not to get deceived by their charming but deadly words. Here are some of the terms that will be discussed in this article.

Principal and Interest Amount 

This is the amount that is borrowed, or the amount that is left unpaid. This amount will then be the basis for the income that one has to pay monthly or annually, depending on the agreement that both parties have made.

Mortgage Prepay Penalties 

This penalty is included in cases that one will pay the full amount of the money that was borrowed. Usually it is a large amount so that one will hesitate in paying in full. They give this penalty primarily because of the income that they will lose when a full payment is made. The lending company lives because of the interests that they include in every borrower that made a loan on their accord. Thus, it is best to pay regularly the payment schedule.

Building Equity While Reducing Debt

Equity is the difference in the current value of a property and the balance of the mortgage obligations. As the value increase and the mortgage value also decreases, then the money in the bank will grow. In building more equity to one’s home then he must do the following – high down-payment, extra principal payments, short mortgage terms and home improvements.

Higher down payment at the time of purchase is the easiest way to build equity. This gives an initial amount to the “bank”. Paying extra amounts in the monthly payment will give two effects – one is for every dollar that exceeds the main amount will reduce the debt in the same amount; and two is that in the long run, the time that you are required to pay will reduce and the interest will reduce as well. Shorter mortgage terms is when the time of loan payment will be reduced, thus increasing additional equity at a fast rate. Improving your home will increase the value, thus increasing the equity. But there are some conditions when considering home improvements. Just ask for the lender’s policy so that you will not be given returns.

Financial Advice

 If ever you are still unsure of the decision you made, then you should contact a financial advisor. They will guide you in what are the best deals in town and give you knowledge on the system so that in the future you will be independent on doing similar things. There are also online sites that offer advice on mortgage or mortgage refinance.


Sarah Dinkins is a financial advisor who has been associated with Guaranteed Bad Credit Loans since long ago. To find Personal Loans, Guaranteed Unsecured Credit Card, and others visit