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Mortgage Basics

    Putting together your mortgage financing is likely one of the most exciting times of your life. You've probably put an offer in on a house. You've normally got about 10 business days to clear up all the conditions on your offer, including a house inspection and financing, or the deal will fall through. Now what?
    Hopefully, you got pre-approved for a mortgage, before you went house hunting. If you did, you are in very good shape. The more places you got pre-approved, the better. Now, when the "rubber meets the road", you'll have to get the best final quote and get ready to sign some preliminary documents.
    Perhaps you've already done the shopping around for the best rate when you were getting pre-approved, and now your next steps are fairly easy! All you have to do is confirm to your lending institution that your sale is about to go through, and get them to confirm to you your rate and their readiness to take on the mortgage. With the information that you provide about the property and home in hand, your lender is now ready to mortgage the new home once the sale is completed. You have very little more to do.
    However, if you think that you might not have as good an interest rate as you might like, now is the time to get competing quotes and quickly. You'll need to get those mortgage quotes, compare them and potentially re-negotiate with a new lender. And while 10 business days may not seem like enough to get that done, most lenders will be able to react very quickly to your need for a mortgage. Just remember that you can do a lot of the work online! Many lenders will actually allow you to complete your mortgage application online, and then provide a guaranteed response time.
     You can also spend a bit of time on the telephone and speak to some of your local, smaller lenders. In some cases, these folks will be very happy to give you customized service in exchange for your business - especially if you have a good credit rating.
     Have you left everything to the last minute and your credit is "less-than-perfect"? The Internet can still be a great tool. Many lenders specialize in either less than perfect credit or even credit repair. Just be aware that you need to compare their quotes very carefully and be sure to read the fine print. Some lenders can have charges and fees that you wouldn't expect hidden in that fine print.

Mortgage Basics
     What the heck does "mortgage" mean anyway? Strangely enough, the word "mortgage" comes from the French word "mort," which means "dead," and "gage," from Old English which means "pledge".
     According to Sir Edward Coke (who lived from 1552 to 1634), the term came from the doubtfulness of whether or not the mortgagor would pay the debt! In those days, if the mortgagor did not, then the land pledged as security for the debt was taken away. The land was considered 'dead' to the mortgagor. (In other words, as if the person never had it.)
    Nowadays, the term mortgage is commonly used to refer to a loan for the purpose of purchasing a property. We don't associate anyone's death with it! (Although, it might seem as if you might be dead before your mortgage is paid off.)
     Home mortgages are the most common type of mortgage. Very few of us will be in the unique position of paying cash for our home.
     Unlike most loans, your home mortgage will be renegotiated before you've paid it off. This is standard. In fact, you will have a 'life' of the home mortgage and a 'term' for the interest rate that you pay. The life of the home mortgage is commonly 20, 25 or 30 years. This represents the length of time in which your home will be paid off (if you pay regularly and with the specified amount).
   You will also have a term for the interest rate that you pay on your home mortgage. This is the length of time over which you will have an agreed payment schedule with certain additional conditions. In effect, this is the time period over which you've agreed to:

  • Pay at a particular rate of home mortgage interest (either locked in or floating)
  • Certain restrictions for additional payments (usually a certain percentage of the original home mortgage which you can put down each year)
  • Certain restrictions for the increase of monthly home mortgage payments (usually a percentage of the specified monthly payment)
  • Certain restrictions on your ability to re-negotiate the home mortgage interest rate (which is determined by whether the mortgage is "open" or "closed")
  • Penalties if you want to renegotiate the terms of the home mortgage before the specified time period of the contract is expired.

This contractual agreement is normally from 6 months to 10 years. Note that many financial institutions will only negotiate terms for a home mortgage for 5 years or less.



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