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Mortgage What is a Mortgage A mortgage is a debt instrument, secured by the collateral of specified real estate property, that the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until he/she eventually owns the property free and clear. Mortgages are also known as liens against property or claims on property. If the borrower stops paying the mortgage, the bank can foreclose. In a residential mortgage, a home buyer pledges his or her house to the bank. The bank has a claim on the house should the home buyer default on paying the mortgage. In the case of a foreclosure, the bank may evict the homes tenants and sell the house, using the income from the sale to clear the mortgage debt. Mortgages come in many forms. With a fixedrate mortgage, the borrower pays the same interest rate for the life of the loan. Her monthly principal and interest payment never change from the first mortgage payment to the last. Most fixedrate mortgages have a 15 or 30year term. If market interest rates rise, the borrower’s payment does not change. If market interest rates drop significantly, the borrower may be able to secure that lower rate by refinancing the mortgage. A fixedrate mortgage is also called a “traditional mortgage. With an adjustablerate mortgage (ARM), the interest rate is fixed for an initial term, but then it fluctuates with market interest rates. The initial interest rate is often a belowmarket rate, which can make a mortgage seem more affordable than it really is. If interest rates increase later, the borrower may not be able to afford the higher monthly payments. Interest rates could also decrease, making an ARM less expensive. In either case, the monthly payments are unpredictable after the initial term. Other less common types of mortgages, such as interestonly mortgages and paymentoption ARMs, are best used by sophisticated borrowers. Many homeowners got into financial trouble with these types of mortgages during the housing bubble years. When shopping for a mortgage, it is beneficial to use a mortgage calculator, as these tools can give you an idea of the interest rates for the mortgage youre considering. Mortgage calculators can also help you calculate the total cost of interest over the life of the mortgage.

Mortgage Rates Rise uestions frequently asked, are "Do I need Mortgage Insurance when Refinancing a Home?" and "What is Mortgage Insurance?" In this article I will make clear Lenders Mortgage Insurance, when it is required and the benefits when Home Refinancing. The function of Lenders Mortgage Insurance (LMI) is to protect the mortgage lender from incurring a loss of funds in the event of a borrower defaulting on their loan , ending in foreclosure and a ensuing mortgagee sale. If the proceeds from the mortgagee sale are not enough to pay back the mortgage in full, LMI will meet the loss for the home loan lender. LMI shouldn't be confused with Mortgage Protection Insurance (MPI), which protects a borrower against their incapacity to repay their loan in the event of an unforeseen circumstance like unemployment, illness or death. MPI covers payment of your loan instalments and/or your loan balance. CPI insurance is not mandatory and is solely the decision of the borrower. The premium for CPI is paid annually and usually varies based on the size of the mortgage. Why is Lenders Mortgage Insurance required? Lenders including Banks, Building Societies, Credit Unions and non-bank lenders, either use money from deposits held in savings accounts and term deposits, or borrow cash to provide home loans to borrowers for home refinancing, purchasing, construction or equity purposes. By using other peoples' money to fund home loans, the lenders initiate an obligation to repay that cash to the suppliers of the money while at the same time taking on the risk that they may not get all or some of the funds back that they loan. Even though they hold real estate property as security for the mortgage, the value of the property may decline due to market forces, contagion or damage to the improvements, concluding in the security not having adequate value to cover the amount of the home loan. To cover their obligations to the suppliers of the home loan funds, the lending institutions take out LMI to cover any possible shortfall. Do I benefit from Lenders Mortgage Insurance? Before LMI was available, lenders required borrowers to have a deposit of no less than 20% when buying a home or equity of 20% when refinancing a home to minimise the risk of lending and protect them against possible loss in the event of foreclosure. Nowadays with the ability to pass on the risk of loss to an insurance company through LMI, lending institutions are prepared to agree to a lower de oositf orr puurchassesanndl ess quuityf orhommereffinancing.b>drs did ot s M orlieelndiglsss te hoe osss ould eed o ercue ro he rofitso thr otags i ffeticesn omeloan intees ates.To ta wa from tis, lnesop toeffec LI n av he inuacecmay tk n hers ndbear ny os By edin nstttos uing MI te datg o brrwr s ha heyaeabe o uy a omeusn ser epoito refiac a prprtywt a eduedaoun f quiy n/or eeielwe nteet ates ha hywoudohrwise e ale o d with oLI

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