• What is a mortgage?

  First, what a mortgage is not. It is not a loan, nor is it a form of debt.

  A mortgage is the transfer of an interest in property to a lender to securitize a loan, it is the lender's security for a debt; a debt which was normally incurred to purchase the property in the first place.

  Once the obligation of that debt has been fulfilled by the borrower, the lien held by the lender on the property is released.

  Even though technically, a mortgage is just the instrument by which the home loan is guaranteed for repayment to the lender, in the common lexicon, mortgage and home loan are often used interchangeably.

• Mortgage Fast Facts

  1. Average Rate 30-year Fixed:
     5.10% as of October 5, 2009. http://www.bankrate.com/
  2. Average Rate 15-year Fixed:
     4.58% as of October 5, 2009. http://www.bankrate.com/
  3. Average 5/1 Adjustable Rate:
     4.18% as of October 5, 2009. http://www.bankrate.com/

• Types of Mortgages

  30-year fixed rate

  Often the easiest to qualify for and also the one with the maximum tax advantage in terms of having the greatest interest deduction.

  15-year fixed rate

  The shorter term usually results in a lower interest rate. You will pay off this mortgage sooner, but your monthly payments will be larger compared to the 30-year mortgage.

  Adjustable Rate Mortgage

  The adjustable rate mortgage is structured to have a fixed initial interest rate, most often lower than the comparable fixed rate mortgage, for a predetermined period of time. Beware, as when the initial fixed-rate period expires, the interest rate will be readjusted based on market conditions of the time, often resulting in a higher interest rate.

  This is a good option for people planning to stay in their home for a short period of time, less than the period of time during which the fixed rate would be in place.

  Equity Mortgage Loans

  Equity loans are second in lien position to the existing first mortgage. Borrowers take out equity loans to receive cash from the equity that they have built up in the property, often bolstered by appreciated property values.

• Foreclosure

  A lender may foreclose on a property, if the borrower has demonstrated himself to be in non-payment. The foreclosed property may then be sold, and any amount received from the sale applied to the original debt.

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