Secure mortgage loan
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Secure mortgage loan

What do i use to secure my mortgage loan ...

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Acquiring a home is a first time experience that flusters many people. So many new terms to understand can be confusing. In fact, understanding the process from beginning to end is a new experience that often leads to questions.

A mortgage is a loan taken out on a first home purchase or on a vacation home. The actual home along with its accompanying land and additional outdoor structures are held as the collateral or security for the loan.
Collateral is the term that is applied to the actual property that is used to safeguard or protect the lender's investment. When a homeowner acquires a mortgage, the lending agency or bank is listed as the first lien on the home. This means that this agency or bank is first in line to receive repayment of the debt due them if anything should happen to the home. If the homeowner defaults on the loan, the home is repossessed and sold to repay the mortgage. This process is known as foreclosure and only occurs when the homeowner consistently neglects to meet his monthly mortgage obligations.

When the value of a property is determined, all of the structures on the property are added into the equation. This includes garages, sheds, barns, in law suites, or pool houses. Usually, any improvements that have been made to the property increase the value of the property.

The equity of a home is determined from the value of the home less any debt that the homeowner owes. Typically, the current market value of the home less any debt is used to calculate the home's equity. Homeowners build up the equity in the property with each mortgage payment that is made. In general, a portion of each mortgage payment goes toward the principal of the loan and adds to the equity. The exception to this would be an interest only mortgage during the interest only period.

In general, homeowners are expected to place 20% of the home's value as a down payment. If they are unable to do so, they are usually required to obtain PMI or private mortgage insurance in order to secure the mortgage. (don)
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