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What Is A Mortgage?
House Buying Tips
Mortgage Terms Defined
Credit Issues
Mortgage Companies
Types of Mortgage Loans
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Types
of Mortgage Loans
Real estate differs from most
other types of items because it is considered to be a form of
real property. Real property means land, and generally whatever
is erected or affixed to the land, such as buildings, fences
and including light fixtures, plumbing and heating fixtures or
other items which would be personal property if not attached.
There are different methods and laws that exist to define ownership
and other issues regarding real estate. At the heart of all of
this is something called a chain of title. Title is the record
of ownership, and chain is the order (sequence) of claims against
the ownership. Things like property tax bills, mortgages and
mechanic's liens can be (and are) recorded as a claim against
your property in a "chain" (by date of recording).
Fundamentally, there are just
two types of mortgage loans, first and second. First and second
refer to the priority a mortgage will take in the chain of title.
First will always takes precedence over second in a chain of
title.
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First mortgage loans
The most common type is the loan
you get when you buy a house. It is simply known as a first mortgage.
The loan can have a fixed or variable interest rate, a balloon
and/or various term lengths (30 year, 15 year, etc.)
Another type of first mortgage
loan is known as a Refinance Loan. Since there can only be one
first mortgage at a time, a refinance loan will always be for
an amount that will equal or exceed the existing first mortgage
loan. The existing first mortgage loan will be paid off, and
the new mortgage associated with the refinance loan becomes the
new first mortgage in the chain of title. If the amount of the
refinance loan exceeds the amount due on the original loan the
difference is referred to as "cash out".
Second mortgage loans
There are a variety of type of
second mortgage loans usually based on the purpose for the loan.
Regardless of what the loan is called, they are all fundamentally
the same; and they are subordinate to the first mortgage. The
collateral for the loan typically is the equity (current market
value minus all outstanding loan amounts) that exists for the
property. Second mortgage loans can be:
- home equity loan
- home equity line of credit
- debt consolidation loan
- home improvement loan
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