Buying a property, like a house, almost seems impossible because of how much they cost. This is a problem that most families face. Being able to buy your own property is one of the many goals of a lot of people. Who wouldn’t want it? Living in your own house and having your own place is such a wonderful thing. It would be nice to build your own family in a house you call your own. It’s just sad that this goal often gets overseen because buying a property is very expensive.
A mortgage, also known as a mortgage loan, is a loan agreement wherein the lender lends a large amount of money to the borrower so that they can buy the property that they have been dreaming of. This may just be the answer to the problem of being able to own a property. But of course, because it involves a large amount of money, the lender needs to make sure that the borrower is capable of paying for the borrowed amount. That is why aside from the various checks that they do, they also require a collateral or lien of the same value from the buyer as a guarantee that the buyer is willing to take responsibility in making the payments. If the collateral meets the criteria required by the lender, the deal is said to be sealed.
A mortgage agreement contract is a legal contract that is indeed very useful. Because of its usefulness, mortgage contract templates and samples are now made available online. Most of them are being provided for free download. Below are 10+ of the best sample contract templates you can lay your hands on. You can use them to guide you when making your own contract or even use them as your own. What are you waiting for? Download now!
Sample Mortgage Contract
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The Different Types of Mortgages
It is critical that one should know and be familiar about mortgages before they get themselves involved in one. Let’s start off with the types of mortgages. There are different kinds of mortgages and they are the fixed rate mortgage, the variable rate mortgage, the standard rate mortgage, the discount mortgage, the tracker mortgage, and the capped rate mortgage.
- Fixed Rate Mortgage – This type of mortgage is said to be expensive and at the same time hard to obtain because the interest rate of the mortgage does not change over a fixed number of years. This is both good and bad. It is good because even if the interest rate in the market increases, the interest rate that one is paying stays the same. On the other hand, if the interest rate decreases, the mortgage interest still stays the same.
- Variable Rate Mortgage – It is known as the widely used type of mortgage because part of the interest rate risks that the lender shoulders is transferred to the borrower. Also, the interest rate in a variable rate mortgage changes or fluctuates based on a certain index.
- Standard Variable Rate Mortgage (SVR) – Just like the variable rate mortgage, the interest rate in a standard variable rate mortgage also changes or fluctuates over time. The good thing about this type of mortgage is that it gives the borrower freedom on how they would want to deal with things related to the mortgage. The borrower is free to leave the mortgage at any time or make over payments.
- Discount Mortgage – Who wouldn’t want discounts? The discount being offered by the lender is taken from the lender’s standard variable rate. Since the discount provided in this mortgage is taken from a standard variable rate mortgage of the lender, they can freely raise or increase it anytime they want. What’s good about it is that the starting rate of the mortgage is cheap and the monthly payments are low.
- Tracker Mortgage – It is a type of variable rate mortgage that uses a certain index to be able to adjust the interest rate of the loan over a certain period of time.
- Capped Rate Mortgage – In a capped rate mortgage, the rate of the specific mortgage is set to a certain level or value. If the mortgage increases it can rise only up to that level or value, but never beyond the said level.
- Offset Mortgage – This is a way to reduce the monthly payment on your mortgage. An offset mortgage works when you connect or link your savings account to your mortgage. It will automatically make the payments and they are lesser compared to mortgages that are not offset.
Complete Mortgage Contract
Mortgage Agreement Contact Form
Master Mortgage Loan Contract
Model Second Mortgage Contract Form
Basic Concepts of a Mortgage
You need to know the essential elements of a valid contract to make sure that you get the whole idea of how the contract works, and be able to determine if the contract is complete and valid. In a mortgage agreement contract, you still need to look for the same essential elements. On top of that, you also need to know about the basic concepts that are involved.
- Mortgage – A mortgage is a loan used by people who wish to purchase a property or real estate. To be able to get a mortgage loan, the borrower is required to provide the lender with a collateral. This collateral is used to secure the mortgage loan. It can be in a form of a house, a car, or any other property. A mortgage is paid on a monthly basis and comes with the interest rate appropriate to the mortgage being applied for.
- Lender – Institutions who lend people money are called lenders. They can be banking institutions, credit unions, and other members of the business society. Without these lenders, a mortgage would not be offered.
- Borrower – They are the people who are in need to funds to be able to purchase the property that they want. Borrowers can be individuals or they can be businesses who put their properties as collateral for the mortgage.
- Property – In a mortgage, the property means the house or thing being paid for by the mortgage. This is the reason why the mortgage loan is being applied for.
- Principal – No, this is not your principal in school or the headmaster as you call them. The principal refers to the exact amount of money that the borrower wants to borrower. Since it is the exact amount of money, this means that the interest rate is not yet included in it.
- Interest – As we all know, lending money is a business. Nothing is for free. Besides, who would want to lend money to some stranger without getting something in return. So when the borrower borrows money from the lender, the lender adds an interest rate appropriate for the amount of money borrowed and the length of time the borrowed money will be paid for. The interest rates still differ depending on the lender. This is how lending institutions generate income.
- Completion – This is referred to as the real start of the mortgage. What is being completed in the mortgage is the mortgage deed.
- Redemption/ Repayment – This takes place when the outstanding balance of the mortgage gets paid.
- Repossession/Foreclosure – Mortgage payment schedules should be strictly followed because there are certain risks and problems that borrowers may encounter if they fail to do so. Once a payment schedule is missed or if the mortgage is not paid, the property that was put on collateral by the borrower may be foreclosed or repossessed. This means that they lose any right to the property and the deal is considered to be over.
It is important that mortgages are paid on time to avoid the risk of getting the property on collateral to be foreclosed or repossessed. One should take note of the payment schedule. A helpful tool to have this done is with the use of a mortgage payment calculator. There are different mortgage calculators available right now to help you with your mortgage needs.
Detailed Mortgage Agreement Contract
Mortgage Contract for Agricultural Lands
Mortgage Contracts by Individuals
Sample Reverse Mortgage Loan Contract
What Is a Mortgage Underwriting?
A mortgage involves lending a large amount of money, that is why they take caution and select properly to whom they lend the money to. The capability of the borrower to return or pay the mortgage loan is an important criteria. The processes of determining the borrower’s capability to return or pay the mortgage loan is called a mortgage underwriting. Before a mortgage gets approved, the lender first conducts a background check on the borrower and analyze the borrower’s credit-worthiness. They take note of the 3 Cs: credit, capacity, and collateral. To have the mortgage approved, the borrower should be credit-worthy. If they are not, then the mortgage loan will definitely be denied.
What Does Foreclosure or Repossession Mean?
If you missed any of the payment schedules for your mortgage or if you have not paid it at all, the property you have in collateral will be foreclosed or repossessed. It means that the lender claims the property on collateral as payment for the mortgage loan. This is what makes a mortgage loan different from all of the other loans. Nobody wants to have their property foreclosed or repossessed, that is why it is important to make sure that you are capable of making the payments throughout the length of the mortgage contract.
Mortgage Assumption Agreement Contract
Mortgage Loan Origination Agreement Contract
Real Estate Mortgage Contract
Effective Mortgage Loan Agreement Contract
What Are the Advantages and Disadvantages of Mortgages?
Mortgages, just the thought of it would give you mixed emotions. You know that you want it because it’s one of the possible ways for you to be able to own your dream house or property. You know that you don’t want it because having to pay back a very large amount of money might be impossible and you might lose your property on collateral. How do you decide if you have these kinds of feelings? The tool you need is knowledge. Nothing can be too scary or overwhelming if you have knowledge and if you know the facts. Checking out the advantages and disadvantages of mortgages will be good for you.
Advantages of Mortgages
- Some types of mortgages provide the same interest rates throughout the length of your loan. They don’t change even if the market prices have gone up. An example is fixed rate mortgage.
- You will be able to budget your money because you already know how much you need to pay every month for the mortgage. There are also mortgage calculators that you can take advantage of to help you with your mortgage payment schedules.
- There is a type of mortgage that lets one leave the contract anytime they want.
- Discount mortgages provide cheap starting rates and cheap monthly rates.
- It makes owning a home or property affordable.
- A mortgage loan is a cost-effective way of buying a property, like a real estate or a car. It is also one of the possible ways on how common people will be able to buy and own their own property.
- The interest rates in a mortgage loan tends to be lower compared to other forms of loan. It is because you have a property put on collateral that is used by the lender to secure the loan or make sure that the loan can be paid.
- With the availability of a lot of banking and lending institutions that offer mortgages, it is now easier to apply for a mortgage loan.
Disadvantages of Mortgages
After all the good stuff, let us learn about the bad stuff so that we won’t end up getting surpirsed and upset about them.
- Although there are mortgages that provided a fixed interest rate throughout the length of the loan, there are also mortgages whose interest rates change or fluctuate based on an index. It is important that you know what type of mortgage you are getting yourself into to be able to avoid such a surprise.
- Leaving a mortgage before the end of the contract is possible, but take note that there will be certain consequences that you will have to face if you do so. It may be a fine or penalty, depending on what has been agreed upon in the contract.
- In a mortgage, you will be paying more than how much you really want to borrow. This is because the lender will add interest to the money you are borrowing, which serves as a fee for letting you borrow the money. This is what’s making the total borrowed amount bigger than what you originally want.
- You might lose your property in collateral if you fail to make the payments as scheduled. Always remember that to seal the mortgage deal, you have to put something as collateral. This gives the lender the feeling of security knowing that they get paid for the loan no matter what happens. So if you don’t want to lose the property on collateral, pay your mortgage dues on time.
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