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Mortgage 101

Home PricesBefore settling on a particular type of mortgage, it is important that you do your due diligence by getting to know the different types of mortgage and their individual advantages. Your lender will typically evaluate your particular needs and financial situation and advise you on what type of mortage is best suited for you.

What is a mortgage?

A mortgage is simply the conveyance or transfer of an interest in a particular fixed property with the intent of using the property as a security for the repayment of a loan. That being said, there are six types of mortgages as will be briefly discussed here.

1. Simple Mortgage

This type of mortgage involves the express or implied binding of the mortgagor/mortgager to the repayment of a loan. This means that the mortgagor has transferred the right of sale of his property to the mortgagee in the event of failing to repay. Although the mortgagee has the right to sell the property, he cannot until after getting a court decree permitting him to do so.

2. Mortgage by Conditional Sale

This type of mortgage refers to a situation where the mortgagor apparently sells the property based on certain conditions. The conditions for sale of the mortgaged property are:

 That on such a payment being made, then the sale cannot be valid, or

 That on default of the payment on the agreed date, the sale becomes absolute, or

 That on such payment being made the person who buys the property shall transfer the property to the seller.

3. English Mortgage

There are three major features of this type of mortgage, which are:

 The mortgagor makes a personal promise to repay the loan on a specific date.

 There is an absolute transference of the mortgaged property to the mortgagee. This also gives the mortgagee the right to sell the property without a court decree.

 The mortgaged property can only be re-transferred when the mortgagor has completely repaid the money on the agreed date.

4. Mortgage based on usufruct

Also called usufructuary mortgage, this type of mortgage is based on usufruct, which is a legal right that allows a person to receive profits from a property owned by someone else. Usufructuary mortgage compels the mortgager to deliver the property as well as giving the mortgage the following rights:

 The right to hold on to the property until repayment is done.

 The right to get part, or the total rent profit from the property.

 The right to receive the rent profits in the place of the interest or the loan or the both.

 The right to incur any liabilities during the course of ownership

5. Mortgage by deposit of title deeds

Sometimes referred to as “equitable mortgage,” this type of mortgage is common with banks as it does not require any registration. It simply involves the transfer of property title deeds by the mortgagor to the mortgagee as a form of security for a loan.

6. Anomalous mortgage

This refers to any mortgage which does not conform to the definition of any of the other types of mortgage. Example of anomalous mortgage is the kind which results from the combination of two or more types of the other mortgage types.

If you are looking to buy a home, I can recommended an experienced trusted lender who will work diligently to help you find a mortgage that meets your needs.

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What is a Leasehold Mortgage?

When you’re buying or selling a home, it’s important to understand the different types of mortgages you may encounter. They aren’t all the same, and they can get a little difficult to understand if you don’t do a little prior research or consult with a lender. This is usually a type of mortgage that affects commercial properties, but this isn’t always the case. Learn what a leasehold mortgage is in the event you come across this term during your buying or selling experience.

The Basics:  Whether you’re buying land or buying a building, when you take out a mortgage to make your purchase, part of the collateral for the mortgage becomes the property you’re purchasing. This is true no matter what you’re buying, and it’s the reason why a bank or lender can repossess a home that hasn’t had its mortgage paid in a long time.

However, if you’re leasing a property or a piece of land, such as in the event of an office or a business that’s located in a commercial site available for lease instead of for purchase, you yourself don’t own the property. This means that the property can’t be used as collateral against your loan.

With a leasehold mortgage in place, the buildings on the property can be used as collateral even if the land itself can’t be.

Additional Possibilities:  If the owner of the property you’re leasing from agrees to subordinate the fee for the leasehold mortgage, this means the lender’s claims will take priority over the owner’s. So if you, as someone leasing the property, end up owing both the owner and the lender money for the property, the lender will be able to take precedence over the owner of the property to gain back any losses.

Otherwise, the owner of the property will take precedence in terms of the ability to reclaim any losses incurred.

Why Choose One?  There are several situations where this type of mortgage may be appropriate, but a leasehold mortgage will most likely be used when development or construction needs to take place on a property. This means that the person interested in developing a piece of land may lease that land and complete construction on it as part of the mortgage requirements.

From there, if payments are not made, the construction or completed buildings can be repossessed by the owner of the land or by the lender, depending on the situation.

Interest rates are still low and there are many loan options to chose from.  Contact me to get started!