What is a Mortgage and Why Do You Need It?
A mortgage is a credit loan with real estate being the collateral.
It is known to be a loan agreement, a written document regarding the loan between a borrower (mortgagor) and a lender(mortgagee). If you set it up with the Bank of America, you will be the mortgagor and the bank will be the mortgagee.
It gives borrowers the leverage they need to free their capital.
One good advantage of paying it is, the borrower is paying good interest on mortgage while the interest itself is tax deductible at the same time.
Once the borrower or mortgagor fails to submit payments exceeding the specifics of the agreement or breaks any point of the deal, the lender or mortgagee can legally apprehend the loan’s collateral – typically, the borrower’s home.
Loans usually offer a grace period of at least two weeks if the borrower misses a payment. Overdue payments penalty will be around a 5% addition of your monthly charges.
Lenders will be keen on sending reminders through phone calls and letters. If the borrower fails to submit payments within the federal rules of 120 days, the lender could file a case to the state court and begin the foreclosure.
Every state in America has different foreclosure methods.
In Florida, foreclosures are judicial. The lenders are required to file a lawsuit compliant under the state court. The borrowers are given 20 days to file an answer through the same court. If no answers were filed, the lender receives a default judgement from the court. To read more on Florida Mortgage and Foreclosure Procedures, see Nolo’s Article.
But if you’re considered a good payer and constantly deliver your payments on time, the mortgage balance will lower to your benefit and equity advantage.
Types of Mortgage
There are two types of loan agreement.
• Mortgage
• Deed of Trust
It’s very typical for the mortgage and deed of trust to be used correspondently, since both are often used in the same context while most financial businesses only use one of the two types. But there’s a difference between mortgage and deed of trust:
First being, the mortgage includes only a maximum of two parties – the mortgagor and mortgagee, as previously discussed.
Deed of Trust, however, have a maximum of 3 parties: the borrower (trustor), lender (beneficiary), and added a third party influential with the sale (trustee).
Another difference between the two types of loan agreement is their foreclosing. The foreclosing process of a mortgage generally takes a year, sometimes even longer. While a deed of trust can be concluded in 4 months or shorter – immediately after a Notice of Default is released by the state court.
Either of the two will be very difficult to obtain without a good credit record. Zero FICO score and no means of credit would most likely charge you a higher interest rate.
A full loan agreement coverage could be a week-long discussion and we have barely scratched the surface. If you want more information about mortgage and how we can help, leave your information and we’ll set up a call!
Buy Like Rent is a Real Estate Agency based in Florida with an experience for over 50 years in rent-to-own, buy and sell, property investment, real estate brokerage, and mortgage banking operation services.
