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MORTGAGE

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Nicole Albright

on 11 June 2016

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Transcript of MORTGAGE

MORTGAGE
Amortization
decreasing an amount of money over a period of time.
A shorter amortization saves you money as you will pay less in interest costs over the life of your mortgage. However, the benefits are that you build the equity in your home faster and are mortgage free sooner.
A longer amortization provides you lower monthly payments and because of this it is appealing to many people. However, it does mean that more interest will be paid over the life of the mortgage and you will build the equity in your home at a slower pace.
Mortgage Note
is a promissory note secured by a specified mortgage loan to pay the loan.
Mortgage Broker
Blended
An interest rate charged on a loan, which is in between a previous rate and the new rate.
A mixture of variable and fixed rate mortgage
The purpose of the blended rate is to give customers an incentive to stay with a bank when they refinance. Customers would not be able to secure a rate this low in the open market, so it gives them a good incentive to stay with the same lender. At the same time, the bank benefits by keeping its existing customers and not losing them to another lender.
Interest Rate
a financial charge for use of the lender's money.
Principal
Fixed Rate
Variable Mortgage
Rate

Pay a fixed amount of money for a set amount of years
Interest rates and "note" stay the same through out the process of paying off the loan
the original size of the loan,which or may not include certain other costs; as any principal is repaid, the principal will go down in size.
Lender
Mortgage as
Investments
Duties of Mortgage Broker

Retail banking: dealing directly with individuals and small businesses
Business banking: providing services to mid-market business
Corporate banking: directed at large business entities
Land mortgage banking: it specializes in originating and/or serving land mortgage loans
Private banking: providing wealth management services to high net worth individuals and families
Investment banking: relating to activities on the financial markets

a loan obtained through the conveyance of property as security.
bank loan used to buy a house
How mortgage Work?
Fixed-rate mortgages are characterized by amount of loan, interest rate, compounding frequency, and duration.
Fixed rate mortgages are usually more expensive than adjustable rate mortgages (variable rate).
Can a mortgage be used
to buy a car?
also known as 'adjustable rate mortgage'
mortgage notes offer investors a stream of payments over a period of time.
Mortgage notes could be anything from $10,000 to tens of millions of dollars.
Mortgage notes are traded on the secondary market whole or as part of a mortgage-backed security.
For example, if you borrow $25,000 from a Bank to purchase a car, the principal balance is $25,000. As time goes by and you make payments on the loan, the principal balance goes down.
variable rates have proven to be less expensive over time.
the rate at which interest is paid by a borrower (debtor) for the use of money that they borrow from a lender (creditor).
variable rate mortgage are driven by economic factor, except the variable fluctuate with movement.
needs to be licensed
Works for client
a non -changing amount of money paid by the borrower at a certain rate.
an extra fee (usually a percentage of the loan) paid by the borrower.
In this agreement, the borrower promises to pay back the loan, plus interest, within a certain period of time.
With mortgage interest rates generally lower than for car finance you might be wondering how you could leverage your mortgage to buy your car.
Redrawing from your mortgage
Refinancing from your mortgage
Redrawing from your
mortgage
Positive
convenience
speed
affordability
Negative
How much it will cost
Refinancing your mortgage
Positive
There might be flexibility to how you refinance - for example, lowering your repayments by extending the loan term (but this could also increase your total interest).
Depending on your loan (and how long ago you got it), you may also be able to get a lower interest rate or better features on current products
Negative
Your home lender may charge you a fee to refinance. This can be as high as $500 so is worth checking up front.
Your loan balance will increase. If you pay back the minimum repayments this will usually result in an increase in total interest charges.
Home Equity
The borrower uses there items at home as payment for loan.
Sometimes called "real property value".
Equity is an asset, so it’s a part of your total net worth. You can spend it someday if you need to. You might use it to buy your next home, to live in retirement, or to pay for an education. It’s a large and important asset, so choose wisely.
is a creditor or any entity to which you owe money for services provided.
if you borrow a money from a bank, the bank becomes your lender
The role of a mortgage broker is solely to bring property buyers together with mortgage lenders. The mortgage broker has no involvement in the actual lending. For this reason, it is important not to confuse mortgage brokers with mortgage bankers, which are individuals and institutions with the financial resources to fund mortgages.
If you're ahead on your mortgage repayments then you might have accumulated a 'nest egg' you can redraw to fund buying a car. There are both positives and negatives to consider before doing this.
Example
Redraw A: After funds have been redrawn to buy a car only the minimum repayments are made on the home loan. The extra cost of the car, which is not offset by any extra repayments, results in an extra $11,500 in total interest on the home loan over the remaining 20 years of the loan.
Redraw B: By increasing home loan repayments after redrawing funds for the car, paying higher total interest over the life of the home loan is avoided.
Example
Assume you bought a house for $200,000, made a 20% down payment, and got a loan to cover the rest. In that example, your home equity interest is 20% of the home’s value: the home is worth $200,000 and you contributed $40,000 - or 20%. You own the home, but you really only "own" $40,000 worth of it.

It might be easier to think about home equity in terms of what you owe instead of what you’ve contributed. Prices change over time. You can figure out how much home equity you have by subtracting any money you owe from the home’s value. The home is worth $200,000, but you owe $160,000. The loan balance is 80% of your home’s value, so the remaining 20% is your home equity.
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