Spaghetti asked:


I have a mortgage of 200K.I have a first mortgage of 160K at a fixed rate of 5.785% over 30yrs. and the 2nd one’s 40K at 9.00% fixed.Now,the value of my place went up to about 350K in the last 4 years.Should I stay with my current plan or should I re-finance? And if I do,which way should I go? Home Equity loan or Home Equity line?

Phyllis

Anthony Dean asked:


This article is hopefully going to explain many of the things people believe about mortgages that are actually false.The most important thing you must realize about a mortgage is that what you believe it to be is actually wrong. For one thing, although we commonly call them Mortgage home loans, this is not at all what they actually are; in fact, they aren’t loans at all, nor are they something that has been given to you by lenders. The mortgage is a legal contract between the mortgagor who is buying the property and the mortgagee, the person supplying the finance and security against the property. In fact, in reality, this isn’t the debt but the security required by the lender to protect their interests for the duration of the term.

A mortgage is used as a method by which individuals or businesses can purchase residential or commercial property without paying the full value upfront. There are also misconceptions about how they work so below is a description of how the process works. Being the financier, the mortgagee is the person who lends funds to the mortgagor or borrower. A security measure designed for purchasing properties, called a lien, is enforced until the mortgage is cleared at the end of the term.

This is the collateral or the security for the mortgagee who has provided the security instrument. Information about the lien is registered at a county courthouse, or similar, to ensure the contract is official and binding. The lien stays in force while the debt remains but the property is actually owned by the mortgagor. This is a strange situation where the mortgagor still owns the property even though the debt still remains to be paid.

This means the only occasion that can arise whereby the mortgagee can legally sell your home is if you stop making payments and it needs to be sold to repay the finance used to purchase it. In the unfortunate event that requires the property to be sold or Foreclosed, then the case will need to be presented to the courts for approval. The reason behind this process is to ensure the legal procedures have been followed and also why it is called Judicial Foreclosure. Obviously there is much more to the subject than this, but these are the basic foundations upon which the mortgaging system has been constructed.

Despite increasing numbers of the population having a mortgage, it is amazing how few people actually know what they are and how they work. A common misconception is that a Mortgage is a Home Loan but this is false and people need to be educated about the fact that it is not a loan at all. The mortgagor is the person who owes money to the mortgagee (the person who finances the deal) using a legal contract called a mortgage. Actually, it is in fact a legal document that is designed to ensure the lenders financial interests are secure.

The facility that a mortgage creates means individuals and companies can acquire land or property without needing the full face value to purchase it at the time. To help understand how this works, some important information is discussed here. Unfortunately it is our own common use of word like Borrower and Lender that has mislead people into thinking a mortgage is a loan when they should be referred to as Mortgagor and Mortgagee respectively. A lien is a means by which the mortgagor can purchase a home but it is the mortgagee that retains legal ownership until the arrangement between them has been completed (the debt is paid off).

This system works so successfully because the risk of loss on the part of the mortgagee is all but eliminated as they have legal possession of the property until the debt is completely repaid. This lien than becomes a matter of public record when it is registered at the county courthouse or equivalent. This act makes the purchase and the ownership of the house official and no-one can transfer this ownership until the debt is fully paid off. So how this works is that the mortgagor (you) owns the property completely even though the mortgagee has possession of the mortgage but not the title.

The only time the mortgagee has any rights over your property is in the event that you default on payments when he can sell it to recover the outstanding debt. This is the dreaded process referred to as foreclosure but if the property is used as security, then the foreclosure must go through the court system. This is done in order for it to be considered legal; this type of foreclosure is referred to as a judicial foreclosure. This is only a short introduction as the subject is much more complex but this information should make this important issue much clearer.



GARTH