Mortage Loan

By: EconomyWatch Content   Date: 17 December 2009

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A mortgage loan is intended to provide a homebuyer the required financing for purchasing a home or property. There can be two or more loans or liens on a property. All mortgage loans must be registered with the designated county or city registry. There are different types of mortgage loans and borrowers must choose one based on their financial requirements.

 

Mortage Loan: First Mortgage

When you register a mortgage loan for the first time, it is called first mortgage. The repayment period for a first loan can vary from five to thirty years. A borrower may apply for a mortgage loan online or in person as per the lender’s requirement. The process begins with the borrower applying for a loan by submitting various documents. These documents include proofs of the homebuyer’s personal and employment details, income and expenses. Most mortgage lenders also ask for a copy of the credit report. The status of the credit report influences the sanctioned loan amount, the interest rate and loan approval.

 

A borrower must also provide the details of the property he intends to buy. If a borrower fails to make the monthly payments on time, the lender has the right to foreclose or sell the property. This is done to recover the money lost in issuing the loan.

Mortage Loan: Second Mortgage

A second mortgage has lower lien priority than the first mortgage. One may qualify for a second mortgage loan after the first loan has been approved. Usually, the lender who approves the first loan also grants the second one. A borrower may obtain the second mortgage from a different lender as well. However, in case of default, the primary mortgage lender will have the right to get the money obtained through foreclosure of the property. If any money is left, it is given to the second mortgage lender.

 

The term of repayment of second mortgage is shorter than the first mortgage. The factors that influence a lender’s decision about issuing a second mortgage include the amount outstanding on the first mortgage, the property’s current market value and the borrower’s credit rating. The interest rate on a second mortgage is usually higher due to the enhanced risk involved in lending.

 


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