First Mortgage is defined as the loan provided to a property that has been mortgaged. One of the most important points regarding the first mortgage is that when the loan repayment defaults, the person who has provided money when the property has been mortgaged for the first time has a lot of control over the title deed and other privileges of the property.
The best source of urgent financial requirement
One of the biggest advantages of First Mortgage is that it helps you unlock the dormant value of the property you hold. In case you are unable to find any value boom for that property, then going for a first mortgage for that particular property helps you in securing money and other required financial resources for buying another property or any of your other financial needs.
- Increase your credit rating
Even if you hold a high-value property, if your credit rating is very low then the lender would think more than once to give the money you are demanding. This is why it is advised to increase your credit rating score. You can consult a good financial advisor on ways to improve your credit rating score so that your chances of obtaining a high-value loan on the mortgaged property are very high. This is highly important when it comes to First Mortgage.
- The lender doesn’t lose money in First Mortgage.
When it comes to lending money for First Mortgage, if the borrower is not in a position to pay the dues in regular intervals of time, then the lender can sell the property for a designated amount. This ends up in him not losing any of the money he had lent to the borrower.
- The rate of interest is not too high
First Mortgage is very beneficial to both the borrower and the lender the lender doesn’t lose any money as he gets to enjoy the benefits of selling off the mortgaged property.
In the case of the borrower, the rates of interest levied are way too less when compared to the second mortgage. This is because a second mortgage might lead to a lot of
problems like reselling not being allowed, benefits cannot be accrued from selling the mortgaged property, etc.,
- Value of property and price for purchase
Before going in for First Mortgage, it is very essential to be aware of the value of the property and the price you seek for purchasing that property. In case, the price you seek ends up being more than the value of the property, then you need a deposit of more than five percent of the value of the property to cover up the expenses under the accrue of the additional amount.
Types of repayment options for first mortgages
There are generally three types of repayment options available for first mortgages.
- Repayment mortgage
This is the most common type of practice where the interest is paid off and the amount borrowed as capital is paid in a small amount every month.
Around 25 years is allotted as the period for a repayment mortgage.
- Interest-only repayment mortgage
This is the type in which interest is only paid. It is not in place these days.
- Part in part mortgage
This one in which there are characteristics of both repayment mortgage and interest-only mortgage.
There are a lot of other details you need to be aware of while going in for First Mortgage. But these are some of the most essential things you need to keep in mind that will help you in purchasing your dream home.