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A Consumers Guide To Mortgages

Apr 16, 2008
The mortgage is a financial tool used by consumers to obtain a temporary relief from financial strain. Mortgages have the power to send home owners into a spiraling debt- so it's incredibly important that consumers are educated on the practices of mortgages before ever thinking of applying for one with a lending facility.

The mortgage process is basically a promise from land owners that they will repay a loan- and they put their property on the line for collateral. Mortgages have become so common in today's society that there are even options for some to get second or third mortgages on properties they own. This, as many will see, is essentially playing with fire unless proper education is present.

When one obtains a mortgage, there are two ways to do so. The first is what is called a mortgage on demise- which is simply just a mortgage that surrenders the property to the lender until the debt is paid off. The mortgage by legal charge is the safer type of mortgage for property home owners, as it lets them keep the property in their name. They will, however, run the risk of the lender being able to take their property at any time.

If a borrower misses just one single payment, lenders have the right to foreclose the property. This essentially is the process of the lender selling the property in order to recover any debts the property owner could not pay off. Because of foreclosure, it's very important all payments are made on time and with haste.

Interest rates can be obtained with fixed rates or variable rates. The fixed rate is good for borrowers who are currently observing a healthy economy that provides low interest rates. The fixed rate will be "locked in" at this rate no matter how the economy changes. Variable rates, rather, change as the economy does- and can fluctuate up or down repeatedly.

If a property owner opts for the variable rate mortgage, all is not lost if market conditions worsen. Lenders often allow for refinancing, which will essentially update the contract between the lender and borrower to include a different interest rate. This can be better than a fixed rate mortgage in the case that market conditions improve- so it's always a nice feature to have.

Because mortgages commonly give lenders the power to sell or take property over from the borrower, you should only do business with trusted financial institutions. This can avoid scams and unfair takeovers of your property. Where possible, try to get as much protection as you can in the contractual agreement.

Before the contracts are written up and signed, be sure that you have exhausted all options. Once you are sure that the mortgage is necessary and that you have found a reputed lender, always hire a lawyer or financial adviser to overlook the contact if you can't yourself. Doing so can help nullify any possible hardships as a result.
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