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Mortgage Advice
When a customer offers immovable property like land and a building as security for a loan, charge thereon is created by
means of mortgage. Theoretically speaking, mortgage can be defined as the transfer on an interest in specific immovable
property for the purpose of securing the payment of money, advanced or to be advanced by way of loan, an existing or future
debt, or the performance of an engagement which may give rise to a pecuniary liability. In the whole process, the
transferor is called mortgagor; the transferee mortgagee; the principal money and interest thereon, the payment of which is
secured are called the mortgage money and instrument, if any, by which the transfer is effected is called a mortgage
deed.
The proper understanding of the above-mentioned terms is very important when considering any kind of mortgage
advice. On the basis of these terms, a mortgage is the transfer of an interest in the specific immovable property and
differs from sale wherein the ownership of the property is transferred. Transfer on an interest in the property means that
the owner transfers some of the rights of ownership to the mortgagee and retains the remaining rights with himself. For
example, a mortgagor retains the right of redemption of the mortgaged property.
It is worth mentioning that if there
is more than one co-owner of an immovable property, every co-owner is entitled to mortgage in his share in the property.
The property intended to be mortgaged must be specific. In other words, it can be described and identified by its location,
size and other factors. The object of transfer of interest in the property must be to secure a loan or to ensure the
performance of an engagement that results in monetary obligation. Thus the property may be mortgaged to provide security to
the creditor in respect of the loans already taken by the mortgagor or in respect of the loans which he intends to take in
future.
When considering any independent mortgage advice, it is essential to understand the mechanism of
Usufructuary Mortgage. Under this mortgage, the mortgagor gives possession of the property or binds himself, either
expressly or by implication, to give such possession to the mortgagee. The mortgagee is authorized to retain his possession
over the property until the payment of the mortgage money is made and to receive rents and profits accruing from the
property and to appropriate the same in lieu of interest or in payment of the mortgage money or in both.
The chief characteristics of usufructuary mortgage is the transfer of the possession over the mortgaged property to the
mortgagee, who is entitled to receive income accruing these from and to appropriate the same towards the payment of the
mortgage money and/or interest thereon. The liability of the mortgagor is thus gradually reduced.
It is worth
mentioning in this regard that it is not necessary that a deed of mortgage must always refer to a particular rate of
interest. It is certainly open to the parties to agree that the income from the property accruing over a certain period
will be sufficient to cover the principal as well as the interest. In the case of a usufructuary mortgage, the mortgagor
and the mortgagee agree that the entire amount due by the mortgagor to the mortgagee should be recouped by the mortgagee by
the enjoyment of the usufructs from the mortgaged property over a specified number of years. The document may not refer to
any interest payable on the principal, even though an element of interest and its rate and income from the property might
have gone into their calculation, when the parties determined the number of years during which the mortgagee was authorized
to remain in possession of the mortgaged property for the purpose of reimbursing himself.
One of the most common
things that borrowers ask lenders is what their rates will be. The rates a lender has is very volatile, it is not always
the same. So the lender will always have to wait via fax, E-mail or a secure website for the rate sheet that comes from
their company. Because it is volatile the rates could even change 5 times in one day. As a borrower you have no right to
see the rate sheet, this is basically the advantage or a way for the lenders to do the business. The rate sheet will always
show the interest rates and the cost expressed in points. A point is equal to one percent of the loan.
The cost of
the rate usually vary depending on the interest rates, higher rates are cheaper compared to lower rates. This is done
because it helps the lender to earn more over the interest for the period of the loan, so lenders charge less cost. When
customers want a lower interest rate, they are charged with higher cost because lenders will earn fewer in the longer
period of the loan.
The point system would usually work in this way: Zero points mean par value or pricing. The
numbers in parenthesis means “premium” or “rebate”. Premium or rebate means that the money is paid back to the loan officer
or where the loan originated at a rate instead of having a cost.
The loan officers are paid by commission. The
earnings of the loan officer and the branch are split between them. The fees that are not subject to the points are not
split up and instead directly go to the branch.
Before giving you hisquotation price, the lender will add on the
profit he and his branch would like to make. Don’t worry however as there limits are set by the company as how high or much
he or she can add to his cost. For the lender, he or she should not worry about the limitations because between the minimum
and maximum there is a great deal of flexibility.
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