Since the cost of purchasing a property is usually too expensive to afford, a mortgage loan can be useful. Any individual can purchase a house through a mortgage loan, as long as he or she has a good credit score. Also, a contract is useful especially in business lawsuits when a breach of contract happens.
There are essential elements of a contract needed for it to be a valid contract. You can refer to the samples and formats below to help you write your contract. You can read about the important elements as well as the step-by-step process of writing one below.
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Private Mortgage Disclosure Contract
What to Include in a Mortgage Contract
When you get a mortgage loan for the purchase of a house, you will be provided a mortgage contract. Here’s a list of items that should be included in your mortgage contract.
- Interest Rate – A mortgage contract agreement should indicate the interest rate of your mortgage loan when you purchase a house.
- Fixed or Adjustable Rate – It is necessary for anyone buying a house to understand whether the interest rate is fixed or adjustable. An adjustable interest rate means that the interest rate can change after a certain period.
- Prepayment Penalties – A mortgage contract also indicates if your mortgage loan has prepayment penalties. This means that if you pay off your loan early, you will be charged a certain amount.
Step-by-Step Process of Writing a Mortgage Contract
- Give your contract a title. Write a “Loan Agreement” in the first part of your contract.
- Write the complete names of both the lender and the borrower.
- List the terms of the contract such as the real estate terms.
- Then, write the borrower’s rights as well as the warranties of the mortgage contract.
- In final section of Mortgage Agreements, write the policies, waivers, and transfers of the loan.
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Free Mortgage Contract
Types of Mortgage
There are various types of mortgages available when you buy a particular property. It is important to understand how each mortgage type works in order to choose the best mortgage loan when purchasing a property. Here are the types of mortgage loans available.
- Fixed Rate Mortgages – A fixed rate mortgage means that the interest rate of the mortgage loan stays the same throughout the duration of the loan. This type of mortgage costs more than other types of mortgages.
- Variable Rate Mortgages – The interest rate of this type of mortgage changes and fluctuates. A variable rate is a commonly used mortgage loan.
- Standard Variable Rate – The interest rate of this type of mortgage has to be paid by the borrower on a monthly basis. The interest rate also changes and fluctuates over time.
- Discount Mortgage – A discount mortgage is cheaper since a lender offers a discount on the mortgage. A borrower on a discount mortgage loan usually has a lower monthly payment.
- Tracker Mortgage – A tracker mortgage’s interest rate also fluctuates usually based on the Bank of England’s rate.
- Capped Rate Mortgages – A capped rate mortgage has a limit on how high up the interest rate goes.
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