BASICS OF A MORTGAGE BOND
bond is a long-term loan that uses real estate as collateral. A
is commonly used for buying a home or other real estate. In fact, a
bond is the only legal way to secure property as security.
borrow money from a lender and sign your property as surety, that
meaningless unless registered with the deeds office as a bond over the
control was introduced due to the abuse of land and surety that used to
place decades ago, where many land owners lost their land due to
lenders. Remember the old western movies?
So in getting the language correct, you are applying for a housing loan at a bank. If successful, they will register a mortgage bond
at the deeds office linking their loan to your property as security.
You can in fact, lend money privately, from, say your father and he too
can register a bond over the property for his security.
mortgage market offers a variety of mortgage loans catering to the
homebuyers. The titles and details of these plans can become confusing,
especially as new types are introduced continuously. You can make sense
these loan types, however, if you understand the basic principles that
all mortgage loans. Again, you can look to your real estate
OF ALL BONDS
- The home
is used as security to back up the loan. A lender can force sale of the
the borrower defaults by failing to make scheduled payments.
- The larger
the loan compared to the value of the home, the more risky for the
often, the more expensive the loan will be in terms of interest rate
earned by the lender always is equal to the periodic interest rate
outstanding principle balance of the loan. The periodic interest rate
annual interest rate divided by the number of payments in the year
required payment usually is a bit larger than the interest due so that
the loan principal is repaid with each payment. This process is called
Amortization and is why most mortgage loans can be retired when all the
payments have been made.
learn more about the types of financing available, you will notice that
loans appear to have more favorable terms. That may indicate that those
are, indeed, bargains (and it does pay to shop around), but usually it
that those loans could have some feature that is less appealing to
payment and fixed interest rate - fixed rate mortgages
- Fixed rate
but variable payment - graduated payment mortgages
rate and variable payment - adjustable rate mortgages
example, shorter-term loans often have slightly lower interest rates
to longer-term loans. However, the monthly payment for the same amount
principal may be higher because of the shorter term. Variable rate
usually have much lower interest rates to compensate for the risk the
accepts that interest rates will rise in the future.
mortgage loans require monthly payments of the interest, an amount for
principal debt as well as amounts that are set aside for items such as
home insurance if these were taken up as part of your bond. These are
termed “traditional” bonds.
it is rare in these days of tight credit markets, some lenders may
offer "nontraditional" mortgage loans such as interest-only loans,
in which case the borrower pays only the accrued
interest and none of the payment is used to reduce
balance, or loans where the borrower chooses each month whether to
minimum payment, pay the accrued interest only, or pay the accrued
a portion of the principal.
obvious danger of not settling any of the capital, is to find your self
twenty years time with a home you still owe money on.
details on the various costs involved in buying a property go here
your options and get advice from your agent, bond originator and others
- It is the
home buyer's obligation to fully understand the terms of their loan.
Visit the Finance Advice Centre for
all your finance answers
on the various costs involved in buying a property go Here
Go to the Buyer Section for
all your buyer answers
Remember to look through
our Step by Step Buyer
Guide and also visit our Blog
for other helpful information