Mortgage Loans

What Is a Mortgage Loan (or Deed of Trust Loan)?

Mortgage Loan
A mortgage loan (also called a deed of trust loan in some states) is a loan where you (the borrower) agree with the lender that if you do not pay back the loan on time as agreed, the lender may take your home and sell it. A mortgage or deed of trust (Include link) is the document that gives the lender the right to sell your home if the loan is not repaid. A mortgage will be signed by all owners of the property and will be recorded in the official land records. It will be public information. Usually bothyour husband andor wife must sign a mortgage if you are married.

Purchase Money Mortgage Loan
A purchase money mortgage is a loan you get when you first buy your home. A purchase money mortgage loan is final when you sign the documents. You do not have a right to "rescind" (which means change your mind after signing the final loan documents and get out of the loan).

Home Equity Mortgage Loan
A home equity mortgage loan is based on the value of your home minus the amount you currently owe on mortgage loans and judgments (the equity in your home). A home equity loan may be the first mortgage if you have already paid off your mortgage or if it is a "refi."

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It may be less expensive overall to have a second mortgage loan with a higher interest rate than a new "refi" with a lower rate. You should compare all the loan terms, not just the monthly payment and interest rate. A "refi" may unnecessarily add to your total loan cost.

Otherwise it will be a second mortgage loan and you must continue to make your first mortgage loan payments. When you get a home equity loan you have a right to "rescind" (which means change your mind and get out of the loan) for three business days after signing the final loan documents. See Notice of Right to Cancel.

$100,000 (home value) - $60,000 (mortgage) - $10,000 (judgments) = $30,000 (equity)

For example, if your home is worth $100,000 and you owe $60,000 to a mortgage lender plus you have $10,000 in judgments recorded against you, the equity in your home would be $30,000.

"Refi" (Refinancing Mortgage Loan)
A refinancing pays off other mortgage loans that already exist. It also usually pays off any judgments that have been recorded against you.

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When you get a refinancing loan you have a right to "rescind" (which means change your mind and get out of the loan) for three business days after signing the final loan documents. See Notice of Right to Cancel.

It might also pay off other debt you owe, like credit cards, car loans, and personal loans (" Debt Consolidation Loans").

There are two common types of refinancing loans: Cash-out- in addition to refinancing debts, the borrower will also receive some cash. No cash-out - the amount of the refinancing loan is limited to the debts being paid off plus costs charged to you; you will not receive any cash.


Debt Consolidation Loan
A debt consolidation loan is taken out to combine all or many of a person's debts into a single loan. Debt consolidation loans might combine some or all of the following types of debts: credit card bills, medical bills, car loans, loans to purchase major appliances, home improvement loans, etc.

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You should not consolidate your debts into a mortgage loan unless (1) it is going to lower your payments, (2) it will save you money and (3) you will not run up credit card and other debt after taking out the mortgage loan.

A debt consolidation loan should make payment of these debts more affordable by stretching these payments over a longer period of time, at a lower interest rate and for a lower monthly payment. The risks are that nonpayment will place your home at risk and that you will have to pay these debts over a longer period of time, paying more interest in the long run.

How Does a Mortgage Loan Affect your Right to Keep Your Home?
"If you pay you stay. If you don't you won't." If you don't make your mortgage payments on time, the lender may take your home and sell it. The legal process where the lender sells a borrower's home is called "foreclosure." Foreclosure can occur through judicial sale or auction outside the courts. If a foreclosure occurs, you will lose your home and will have to move out. Even though you have lost your home to foreclosure, you may still owe money to the lender.