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Mortgages Explained:
There are lots of mortgage products out there and lots of differences within each
defined product so let talk a little about what each is.
Purchase Money Mortgage
is a mortgage product to provide financing for a purchase of real estate, has a fixed, adjustable or convertible rate based on what is being offered by the lender in the market place.
Cash Out Mortgage: Borrower pulls out cash from their property.
Mostly a situation where the borrower has done substantial capital improvements or repairs and wants to pull their original improvement moneys out.
Blanket Mortgage:
A mortgage that covers more than one piece of property. Often used in subdivisions where multiple building lots are mortgaged and released separately but it can also be used where the lender feels the borrower's qualifications are a little riskier and they want more than one property to secure the loan.
Bridge Mortgage:
Loan that occurs before a previous loan is terminated and another new loan for a purchase is put in place. When a buyer who is also selling a home is able to close on the sold property, they pay off the prior mortgage (if any) as well as the bridge loan. This is usually just short term financing.
Reverse Mortgage:
Qualified senior citizen (age 62 or greater) is able to mortgage their property and receive monthly payments from the lender which reduces their remaining equity accordingly. When deceased or upon termination of the loan, the loan is paid off by the estate.
Wrap Around Mortgages:
These loans can be very beneficial in times of rapidly changing interest rates. This is when an additional loan is given over and above a prior existing loan which is assumable such as an FHA or VA loan. If the interest rate on the first loan is attractive enough, the buyer may want to assume the first loan then obtain a wraparound mortgage to come up with the additional moneys for purchase. The buyer in essence pays the seller who pays the lender on the first mortgage even though only one payment may be due.
Construction Mortgage:
Funds are put in place for the construction or major renovation of a property. Funds are disbursed on a prearranged schedule as work is completed and inspected. Normally there are about a dozen installments but the number can vary depending on how the loan is structured.
Assumable Mortgage:
A loan that can be assumed by a buyer who is approved by the lender. FHA and VA loans are assumable. This can be a good way to buy property especially distressed property where there is equity in the property that could quickly roll over to the buyers.
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