Mortgage, loan and property. What is a mortgage?

A mortgage is putting a property as a guarantee to a lender as a security for a mortgage loan.

While a mortgage in itself is not a liability or a dept, it is evidence of a debt. It is a transfer of an interest in property, from the owner to the mortgage lender, on the condition that this interest will be returned to the owner of the property when the terms of the mortgage have been satisfied or concluded.

In other words, the mortgage is a guarantee for the loan that the lender makes to the borrower. In all but a very few states, a mortgage creates a lien on the title to the mortgaged property.

Friday, July 4, 2008

Adjustable Rate Mortgage

A common form of home loan is the adjustable rate mortgage or ARM. With this type of finance, the interest rate will fluctuate depending on the 6 different real estate indexes.

The interest rate changes so the lender of the loan gets a correct margin. That’s due to the fact that the indexes influence the price tag of funding the loan in the first place.

Basically, your lender lets you take on a little bit of the interest risk instead of just the lender like it is in a fixed rate mortgage loan. This type of mortgage can be great if the interest on your home loan consistently falls for a long time.

You don’t have to worry that much about the interest rates because even if they jump drastically, there are limits on how much your monthly payments will increase.

These limits are usually called caps and mean that no matter the size of the interest jump, you won’t pay more than a certain increase in a certain time period.

As an example, let’s say a bank (or lender) gives you an adjustable rate mortgage. It has a 1 percent cap for any 6 month time frame and a 4 percent total cap for the entire length of the loan.

Your payments can increase by as much as 4 percent at the maximum until the loan is paid off. That’s not too bad if you consider that when interest rates drastically drop, you save a ton of money.

Every region in the country has different interest rates so you should read up on it before you opt to go with an adjustable rate mortgage.

Local newspapers frequently include interest rates and predictions so that should be a great place to go to keep an eye on things.

Wednesday, July 2, 2008

The Good and the Bad of Subprime Mortgages

Subprime home mortgage
It sounds horrible: Subprime Mortgage. But in reality it has many different benefits that other loans do not possesses.

A subprime loan typically has a higher interest rate than other loans because the people who need it frequently have a poor credit history or very low credit score.

These high interest loans do make people pay a lot more for a house they want but actually have some benefits.

There are many financial institutions that specifically deal with subprime lenders. This means they know how to help those with poor credit.

Some banks also offer prime and subprime mortgages because they know their community well and some areas just don’t have the types of jobs that prime mortgages will need to ensure their monthly payments.

It can be embarrassing to go to a local bank if you live in a relatively small town so you may want to choose a subprime only lender.

A good benefit of a subprime mortgage is that you don’t have to take the time to raise your credit score. This can take years of payments and credit building and many people just don’t have the time for all of that.

They realize they made some late payments here and there but are past that and want to own a home. Not everyone with bad credit got it by not paying their bills on time.

Many times, wives and husbands who are irresponsible can annihilate their significant other’s credit and even after divorce, it’s still bad.

A subprime mortgage to many people is a chance for a new beginning. But you still have to note that this type of mortgage make you pay more for your loan.