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A mortgage is a special form of secured loan where the purpose of the loan must be specified to the lender, to purchase assets that must be fixed (not movable) property such as a house or piece of farm land. The assets are registered as the legal property of the borrower but the lender can seize them and dispose of them if they are not satisfied with the manner in which the repayment of the loan is conducted by the borrower. Once the loan is fully repaid, the lender loses this right of seizure and the assets are then deemed to be unencumbered.
Although a mortgage is simply a special kind of loan, we think that the mortgage related topics deserve their own section, simply because the mortgage is the highest debt burden the average individual has.
When shopping for a mortgage, it is a good idea to talk to a mortgage broker, who can give you several competitive offers from different mortgage lenders. Once you find a good mortgage offer, find out how much you can afford to borrow, and also learn how to pay off your mortgage faster.
Individuals must pay for mortgage insurance if they get a high-ration mortgage (mortgage with low down payment). Adjustable rate mortgages are the norm, because borrower can lock their mortgage interest rate short-term (most commonly for 3 to 5 years), however after that the interest rate and mortgage terms must be renegotiated.
The banks and financial institutions are not your only choice when getting a mortgage. You can get a mortgage through a mortgage broker. Mortgage brokers have access to several mortgage lenders and they essentially do the mortgage shopping for you. Mortgage lenders can offer you different mortgage loans from different lenders, thus giving you the opportunity to choose a mortgage that best suits you.
The mortgage broker doesn’t lend you the money for the mortgage, but simply facilitates the deal between the consumer and the lending institution. The best thing to do is to work with several mortgage brokers, thus ensuring that you have access to mortgage offers from as many mortgage lenders as possible. When working with mortgage brokers you are not obligated to use any of the mortgage products they offer you, so using a mortgage broker is always recommended. Once you get the offers from the mortgage brokers you work with, compare them with the mortgage offers you got directly from mortgage lenders, and simply go for the best one.
Many different financial institutions offer mortgages to consumers and businesses. Individuals can get a mortgage from bank, specialized mortgage companies, credit unions, loan firms and insurance companies.
It’s always wise to shop around for mortgage and get offers from as many financial institutions as you can, because different mortgage lenders have different offers and by having more options you can choose a better mortgage.
You can also get mortgage offers from mortgage brokers.
Mortgage insurance (also known as mortgage guarantee) is an insurance policy which compensates lenders or investors for losses due to the default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer. Individuals are required to insure their mortgages by law, if they have a high-ratio mortgage. For the last four decades a mortgage with less than 25% down payment was considered a high-ratio mortgage. In April 2007 all this changed and the requirements for mortgage insurance were lowered – only mortgages with less than 20% down payment will have to be insured. This can save thousands of dollars in mortgage insurance to home buyers.
Due to the lack of competition the mortgage insurance fees were ridiculously high, but this also has changed since there are new players entering the mortgage insurance market.
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