Not all lenders register your mortgage for more than your original mortgage (in this case: $240,000), but some can and do. For those who do so if the value of your property increases (say to $350,000), you can borrow up to 80% of the new value value – minus what you still owe to your mortgage – without having to refinance your mortgage. If you still owe US$150,000 for your mortgage, you would have your equity available such as: For example, suppose you were buying a $300,000 home. After a down payment of 60,000 USD (20%) you need a mortgage of 240,000 USD. Determine the maximum amount the lender can register as part of a security mortgage. Once your home offer has been accepted, and home inspection occurs, you will meet with a mortgage broker or lender to prepare your mortgage. If you opt for a secure mortgage, the lender can register your mortgage up to 125% of the value of your new home. Among the benefits of a collateral mortgage: on the other hand, it is important to understand that it cannot be transferred to another lender with a collateral mortgage, even at the end of your mortgage. If you decide to switch lenders, even if your mortgage is ready to be renewed, you will have to pay a legal fee because you must hire a real estate lawyer to help you exit your collateral mortgage contract. Keep in mind that, in general, a number of assets can be used as collateral. In this case, your home is security. The lender must ensure that there is sufficient insurance to finance the purchase; In other words, it must check whether it can recover the money owed.
This is usually done through resale or sales force. The advantage of a collateral mortgage is therefore really the flexibility to borrow money at home at any time, as well as the ability to avoid the legal costs associated with refinancing. One thing to note is that no matter how much your property goes up, most of the equity you can ever access is the same amount for which your security mortgage was originally registered. In the example above, the security mortgage was registered for $375,000. To access the $375,000, the value of your home would have to reach $468,750 ($468,750 x 80% – $375,000) and you wouldn`t have to make your mortgage ($375,000 – $0 – $375,000). On the other hand, hedging costs can only be accounted for or exempted by your lender. Keep reading about why and how it affects your mortgage. If your offer for a home is accepted and the inspection is successful, you meet with a mortgage broker. The Costa Group`s professionals prepare your mortgage financing and explain how to calculate a collateral mortgage account. A guarantee mortgage is a type of loan that is secured against the borrower`s property (home) by a written debt note such as debt guarantee.