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Mortgage

Table of contents
1 Intro
2 History
3 Mortgage finance industry
4 Mortgage loan types
5 Islamic mortgages
6 See also
7 External links

Intro

A mortgage is a device used to create a lien on real estate by contract. The mortgage is an instrument that the borrower (called the mortgagor) uses to pledge real property to the lender (called the mortgagee) as security for a debt, also called hypothecation.

The mortgage instrument contains two parts:

  • the mortgage, which is the pledge
  • the note, which is the actual evidence of the debt and promise to repay (sometimes called a promissory note).

To protect the lender, a mortgage is recorded in the public records creating a lien (when there are multiple liens, order of recording determines priority).

History

At common law, a mortgage was a conveyance that on its face was absolute and conveyed a fee simple estate, but which was in fact conditional, and would be of no effect if certain conditions were met --- usually, but not necessarily, the payment of a debt by the original landowner. Hence the word "mortgage," Law French for "dead pledge;" that is, it was absolute in form and in theory required no further steps to be taken by the creditor.

In many U. S. states, however, a mortgage has been converted by statute to a device for creating a security interest in land. When the landowner fails to perform on the obligation secured by the mortgage, the mortgage holder must file a foreclosure to cause the property to be sold at auction, usually by the sheriff. Since mortgage debt is often the largest debt owed by the debtor, banks and other mortgage lenders run title searches of the real property to make certain that the lien of the mortgage is prior to anyone else's claim.

Mortgage finance industry

Mortgage lending is a major category of the business of finance in the United States of America. Mortgages are commercial paper and can be conveyed and assigned freely to other holders. In the USA the Home Owners Loan Corporation, the Federal Housing Administration administer the programmes colloquially known as "Ginnie Mae" and "Freddie Mac" (aka the GSE's - the government sponsored enterprises) to foster mortgage lending and thus to encourage home ownership and construction.

Mortgage loan types

There are many types of mortgage loans. The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM).

In a FRM, the interest rate, and hence monthly payment, remains fixed for the life (or term) of the loan. In the US, the term is usually for 15 or 30 years. In the UK the fixed term can be as short as five years, after which the loan reverts to a variable rate.

In an ARM, the interest rate will periodically (annually or even monthly) adjust up or down to some market index. Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where unpredictable interest rates make fixed rate loans difficult to obtain.

A partial amortization or balloon loan is similar to a FRM, but the balance is due at some point short of the full term.

Other loan types:

Islamic mortgages

Islamic Sharia law prohibits the payment or receipt of interest, which means that practising Muslims cannot use conventional mortgages. However, real estate is far too expensive for most people to buy outright using cash: Islamic mortgages solve this problem by having the property change hands twice. In one variation, the bank will buy the house outright and then act as a landlord. The homebuyer, in addition to paying rent, will pay a contribution towards the purchase of the property. When the last payment is made, the property changes hands.

An alternative scheme involves the bank reselling the property according to an installment plan, at a price higher than the original price.

In the United Kingdom, HSBC was the first major bank to offer Islamic mortgages.

See also

Deed, pre-qualification, pre-approval, VA loan, FHA loan

External links

  • Consumer Handbook on Adjustable Rate Mortgages (US Federal Reserve) (PDF)
  • Mortgage Calculator with dynamic diagrams. This mortgage calculator can be used to figure out monthly payments of a home mortgage loan. It factors in PMI (Private Mortgage Insurance), town property taxes, and their effect on the total monthly mortgage payment. The calculations are visualized with the aid of two diagrams, displaying the remaining balance and monthly paid interest vs. monthly paid principal respectively, both on a month/money coordinate system.


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AARP Reverse Mortgages
The American Association of Retired Persons explains all about reverse mortgages.
http://www.aarp.org/revmort/

Mortgage-X
Calculators, mortgage market trends, detailed information on various loan programs, articles and publications, a large vocabulary of mortgage terms.
http://mortgage-x.com/

Home Equity Loan Information
A consumer guide offering advice on how to get a loan.
http://www.home-equity-loan-information.com/

HUD On Your Side: Buying A Home
Various topics are covered from settlement costs to buying land and new construction. Department of Housing and Urban Development.
http://www.hud.gov/buyhome.html

Mortgage Mart
Free consumer oriented mortgage resource center.
http://www.mortgage-mart.com/

Mortgage Orbit
Overview of the process of obtaining a mortgage along with lender options and a glossary.
http://www.mortgageorbit.com/

Mortgage Refinancing Company
Provides information and a mortgage quote search service for consumers.
http://www.homeloanadvisor.com/

Cancellation of Private Mortgage Insurance
July 2000 discussion about a pending federal law that would save consumers money on Private Mortgage Insurance.
http://www.ftc.gov/bcp/conline/pubs/alerts/pmialrt.htm

Home Equity Credit Lines
Still current information about home equity loans from a 1992 FTC article.
http://www.ftc.gov/bcp/conline/pubs/homes/homequt.htm

Home Equity Scams: Borrowers Beware!
What the practices are and how to protect yourself.
http://www.ftc.gov/bcp/conline/pubs/homes/eqscams.htm

Looking for the Best Mortgage
Steps to take and pitfalls to watch out for when getting a home loan.
http://www.ftc.gov/bcp/conline/pubs/homes/bestmorg.htm

Mortgage Discrimination
What the laws say they can't do.
http://www.ftc.gov/bcp/conline/pubs/homes/mortgdis.htm

Articles by David Reed
A collection of home financing articles by a well-known author and speaker on technology and mortgage lending issues.
http://www.realtytimes.com/rtnews/rtcpages/davidreed.htm

Reverse Mortgages
What they are and how they work.
http://www.ftc.gov/bcp/conline/pubs/homes/rms.htm

Mortgage-Helper.com
Information on purchasing homes with little or no money down.
http://www.mortgage-helper.com/

Mortgage Underwriting Guidelines
Information about underwriting guidelines to help determine available financing options to purchase a new home or refinance an existing home.
http://www.mortgageunderwriters.com

When Your Home Is on the Line
What one should know about home equity lines of credit. From the US Federal Reserve Board.
http://www.federalreserve.gov/pubs/homeline/

Mortgage Protection and Critical Illness Insurance Policies
Life Insurance Direct offer mortgage protection, critical illness insurance, and level term assurance policies for mortgage payments insurance cover.
http://www.lifeinsurance-direct.co.uk/mortgage_protection.htm

Need a Loan? Think Twice About Using Your Home as Collateral
Unscrupulous lenders and home equity loan scams.
http://www.ftc.gov/bcp/conline/pubs/homes/hoepa.htm

Eyes Wide Open
A mortgage guide for first time home buyers.
http://www.upandrisingfreedom.com/

About Reverse Mortgages
Describes HUD program which enables seniors to benefit from the equity in their homes without selling and without making mortgage payments.
http://www.AboutReverseMortgages.com/

Understanding the Home Mortgage Process
US Federal Reserve Board provides information to help consumers understand the mortgage lending process.
http://www.federalreserve.gov/pubs/mortgage/morbro.htm

Freddie Mac: Buying and Owning a Home
Comprehensive guide to mortgages, financing, credit, moving and remodeling.
http://www.freddiemac.com/homebuyers/

Home Loan Guaranty Services, Veterans Benefits and Services
Information on the home loan program of the Veterans Administration.
http://www.homeloans.va.gov/veteran.htm

Mortgage Professor
Mortgage articles and resources by Wharton Professor and nationally syndicated mortgage columnist Jack M. Guttentag.
http://www.mtgprofessor.com

Mortgage Talk
Offers a mortgage book plus advice on moving.
http://www.movedoc.com/mortalk.htm

National Center for Home Equity Conversion
Independent nonprofit organization established in 1981 to educate consumers about reverse mortgages.
http://www.reverse.org/

HUD Loans
Information about loans from the U.S. Department of Housing and Urban Development any buying homes with a low down payment.
http://www.hud.gov/buying/insured.cfm

The Educated Home Buyer
Former mortgage loan officer explains home buying process, including how to choose and work with a mortgage lender and real estate agent.
http://www.educatedhomebuyer.com

MBA Online
Home buying information and resources from the Mortgage Bankers Association of America, including homebuying tips and mortgage information.
http://www.mbaa.org/consumer/

Real Estate Radio
Real Estate Radio guides listeners through a complicated world of Real Estate.
http://www.realestateradio.net

AHM Home Buyer and Refinance Guide
A complete and easy to understand homebuyers and refinance guide.
http://www.ahmconnecticut.com/guides/

The Loan Advisor
Objective advice on various types of loans ranging from home loans, refinancing, student loans, and first time mortgages.
http://www.theloanadvisor.net/

Epinions: Mortgage Brokerages
Consumer-generated reviews, buying tips and advice, ratings, price information, and searchable in a variety of ways from price to product type.
http://www.epinions.com/finc-Financial_Services-Online-Mortgage

All Regs
Provides an extensive and up-to-date database of mortgage lending guidelines.
http://www.allregs.com/

Ask Mortgage Master
Provides answers to questions consumers may have regarding mortgages.
http://www.askmortgagemaster.com/

Cities Commerce Corp.
Offers a mortgage tutorial intended to educate homebuyers about mortgage products.
http://www.citiescommerce.com/morgage.htm

Dept. of Housing and Urban Development
Government agency oversees home mortgage lending practices.
http://www.hud.gov/

FreeMortgageHelp.com
Information and tips for residential mortgage financing.
http://www.freemortgagehelp.com/

Home Buyer's Information Center
Presents a consumer guide to choosing a mortgage.
http://www.ourfamilyplace.com/homebuyer/mortgage.html

Jill Hill's Real Estate Guide
Practical tips to help you qualify for the loan you want.
http://www.jillhill.com/loan2.htm

Loanlibrary.com
Free source for mortgage terminology, information, and guidelines.
http://www.loanlibrary.com/

Mortgage 101
Information on credit rating, FHA loans, appraisals, home insurance, and VA loans.
http://www.mortgage101.com/

Loan-Master.com
Offers mortgage guides, information and software.
http://www.loan-master.com/loan-guide/mortgage-best.php3

Decision Aide
Complete set of tools and analysis to determine the optimal way to structure a home loan.
http://www.decisionaide.com

The Parkhill Report
Offers mortgage information and current rates from major lenders.
http://www.loanfax.com/

Mortgage Forum
Post questions and receive answers from mortgage professionals.
http://www.mortgageforum.com/

The Mortgage Journal
Mortgage rates for the northeast United States and home owner news.
http://www.themortgagejournal.com/



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