Mortgage is not a loan as misinterpreted by most of the people. Basically mortgage is a security for the lender i.e. the house you buy, to lend you the required
lloans. The ownership of the loan rests with the money lender until the loan is completely paid off.
How Mortgage Works
Mortgage loans involve two parties one is mortgagee i.e. the
mortgage lenderand the other is mortgagor i.e. the borrower. The lender in the form of bank, housing societies, credit unions etc lend you a loan
secured by your house and in case of default payments they are allowed by law to take possession of your house and sell it for their losses.
Mortgage Types
Mortgages can be fixed and variable. The fixed mortgages have stable monthly payments and the variable mortgages have a variable
interest rates according to the Prime Bank interest rate variations. Other types of mortgage loans are also available.
Second Mortgage
You can borrow a loan against the
home equity loan built in your house by payments of
1st mortgage. This mortgage loan is known as
second mortgages and it works just like your first mortgage except the former cannot supersede the latter. The first mortgage lender has higher priority which means in case of a foreclosure the First mortgage lender is paid first and then the second mortgage. Due to this reason the second mortgage usually comes with a higher interest rate.
Refinancing First and Second Mortgage
If you have paid for 10 years on second mortgage and still some amount of loan is left then you can refinance both of your first and second mortgages for a reduction in interest rate.
Bankruptcy Mortgage
People think that they cannot buy a house after
bankruptcy the facts tell a different story. The laws have relaxed a bit in the past few years and now a home is available for people with bankruptcy and
bad credit if they approach things a little carefully.
Factors Affecting Bankruptcy Mortgage
Chapter 13 filing bankruptcy has more chances of getting approved for a mortgage than
chapter 7 filing. Going to get a loan immediately after a bankruptcy is not a good idea. You should wait for at least two years and try to maintain appositive
credit history which means that you will increase your chances of getting better loans and lower interest rates. One more thing that will get you a good mortgage deal is down payment. If you tell the lender that you can make a down payment of 3-5% then you can settle better loan terms with him too.
Watch out For the Fees
Since you have faced financial difficulties in the past and are bankrupt, lenders may try to take advantage of that by costing you high upfront fees and higher interest rates. That shouldn't be the case. Leave their office and do some hard work in searching for a loan best suited to you in local market as well as online mortgage lender websites.
