How To Get A Commercial Mortgage Today Secured Vs Unsecured Debt Saving Your Home From Foreclosure Expert Ideas For Homeowners And Investors Understanding Mortgage Basics
A loan in which real estate is used as collateral – a guarantee that the loan will be repaid and on time – is usually called a commercial mortgage. While it is much like a residential mortgage, the difference is simply that the collateral and the building purchased with the mortgage is used for commercial rather than residential purposes.
A loan would be considered a commercial mortgage if, for instance, an entrepreneur were moving from his home office to a storefront retail, office or warehouse location due to the growth of her business.
If, however, she simply wanted to expand her home office by another few feet and needed a mortgage loan to do so that loan would probably be considered a residential rather than commercial mortgage.
Another difference between a commercial mortgage and a residential mortgage is how the financial institution looks at the ability to pay the loan. The okay for a residential mortgage, as well as the rate, are determined by the borrowers financial situation – her or his credit history, and current ability to repay the debt.
When considering a commercial mortgage, however, a lender would look at the value and quality of the property being purchased by way of that commercial mortgage, and its ability to bring in revenue.
Rental property in a market that is glutted would be looked on less favorably even when the borrower has sterling credit than a mortgage for commercial rental property in a town that has a scarcity of rentals and people moving in all the time.
Even if the borrower had less than perfect or even some bad credit, he or she would be favored over that person with perfect credit in the town that doesnt bode well for full rental occupancy.
Commercial mortgage loans are charged a considerably higher rate of interest than are residential mortgage loans. These are nearly always fixed rate loans, however, which means that that borrower pays the same interest rate throughout the life of the loan.
There are some capped or variable rate commercial mortgage loans, but theyre not in the majority.
If you are an experienced home owner and mortgage borrower that is just setting out to secure a commercial mortgage for the first time you may be unpleasantly by how much more complicated and time consuming the commercial mortgage process is than its residential counterpart.
That is because the legislated guidelines require lenders to rely on the propertys stability and income history as a means of determining its potential for future profit. It is only after this revenue potential has been determined to be promising that the credit history, financial strength and assets of the commercial borrower are even looked at.
The commercial mortgage application is extensive enough that youll probably benefit from working with a commercial mortgage broker. Youll probably have to provide financial history about the property and your own situation for the last two years.
The format in which this information must be provided is generally quite strict and an experienced and knowledgeable mortgage broker will get you past these commercial mortgage hurdles and on your way to a great fixed or variable rate commercial property mortgage.
There are two primary types of debt: secured and unsecured. The easiest way to understand whether or not you have secured or unsecured debt is to determine whether or not a creditor can take away an object or your property in the event that you suddenly become unable to make payments on the account.
If a creditor can take away tangible property or another item that is somehow attached to the debt, then that is a secured debt. If nothing can be taken from you if you stop making your payments, then that is considered an unsecured debt.
Unsecured debts are usually credit cards, unless you happen to get one of the handful of secured cards available on the market. A secured credit card can be a prepaid card (secured by the amount of your actual deposit), or a card that is secured by some other property or object. Medical bills are also considered an unsecured debt- as you did not have to put up an item as collateral in order to obtain the debt.
Secured debts are commonly large ticket items like mortgages and cars. If you fail to keep up with your mortgage payments, then the bank or mortgage lender can take your home as payment. If you don’t keep up with your car payments, the lender of your vehicle loan will repossess your car.
Once you own a home and build equity, you are able to take loans out on the equity you’ve built. These equity loans are secured debts because they use your home as collateral. If you are unable to pay for your home equity loan, they’ll just take your house to pay for it!
When the Type of Debt Matters
If you are unable to keep up with your expenses and bill payments for one reason or another, the type of debts that you have will make a big difference if you end up having to file for bankruptcy. Most unsecured debts can be eliminated under a Chapter 7 bankruptcy, while secured debts may have to be sold in order to obtain money to pay off other debts before the consumer is eligible to file for bankruptcy.
Good Debt Vs Bad Debt
Believe it or not, not all debt is considered “bad”. It’s a lot like cholesterol in the body- some of it is actually considered “good”! Good debts are those that are used to help build wealth. A mortgage can be seen as a good debt, since the debt has given you the value of the home, and houses increase in value in many cases.
Bad debts are debts that depreciate in value after you’ve purchased them, or purchases for disposable items. Bad debt is typically created by credit cards that are not used wisely or carefully. Personal debt for Americans is on the increase, and credit has actually become easier to obtain than it was in previous years. At one time, credit card issuers looked for customers with strong credit scores, and a proven track record of making payments on time to lend money to; now, it’s almost the opposite! Some credit card companies allow people who are likely to charge more than they can reasonable afford to pay, so that they can charge interest rates of 18%, 20% or higher on the balances, not to mention over the limit fees, late payments or finance charges.
While “bad” debt should be avoided whenever possible, it’s a good idea to keep access to credit cards or loans of some kind, for emergency purposes.
You finally move into your dream home, but then a series of unfortunate events conspire to put you in financial trouble.
Otherwise good people can lose a job, experience relationship problems, or become ill and quickly find themselves in financial hot water. Miss just a few mortgage payments and foreclosure can be knocking at your door.
If you have a lot of money invested in your home, you DON’T want to lose it all in foreclosure. I use a way to save homeowners from foreclosure while making the situation attractive to investors who can bring in the needed money.
An investor puts in the money needed to pay down the homeowner’s mortgage and debts. In return, the investors receive 12 – 14 percent interest on their investment, getting monthly checks from an escrow account.
This improves the homeowner’s credit score while giving them the opportunity to save their home.
If you’re thinking this type of activity could help those having financial difficulty, you’re right. This is a fast, low-risk way to pay off debt, even a lot of debt.
Another smart method is to pay your home mortgage every two weeks rather than the usual once per month. You pay your home loan off years faster while saving a mountain of interest. On average, I’ve seen home owners save a fat $60,000 while owning their homes outright long before they expected.
If living in your home debt-free sounds appealing, this is probably your best way to make it happen.
But what if things don’t go well. I sometimes see very good people get into tough financial situations simply because they lost their job, became ill, or both. In those cases, you need to know what to do to keep your home and avoid foreclosure.
Usually you can structure easier payment plans with your creditors. Most lenders would rather get their money slowly than see you go under, forcing the creditor to say good-bye to their money forever.
You may also be able to get a forbearance to let you put off paying your mortgage until you can get back on your feet.
While these ideas are widely accepted and practiced in the business world, many home owners seem unfamiliar with them.
Being able to buy that house you have always wanted probably means that you will need to get a mortgage. Another word for a mortgage is loan – which you usually get from a bank or other lending agency. Since most people are not able to buy their house with cash, a loan is the most common practice. Here are some things to help you understand mortgage basics.
Length Of The Mortgage
The size of a mortgage makes the length necessarily longer. Common lengths of mortgages can fall anywhere between ten and thirty years. This means, that if you pay according to the terms of the mortgage, that you will have it entirely paid off at the end of that time. Generally, the lower amount of payment you can afford, the longer the time you will need to pay off the mortgage.
Interest On A Mortgage
The interest rates on buying a house or property change every day – sometimes even more than once a day. It depends on the economy, and the area you live in. You need to shop around and get the lowest amount of interest that you can because even one percent over 30 years means a difference of over tens of thousands of dollars.
Two Types Of Mortgages
All mortgages will fall into one of two types. It will be either a fixed rate mortgage, or an adjustable rate mortgage. The fixed rate mortgage is one where the interest and payment amounts are “fixed.” That means it is always the same until the mortgage is paid in full. The other, an adjustable rate mortgage, is, like the name implies – adjustable. That means that the amount of your payments changes in an unpredictable way – according to the economy. If the economy is doing well, then your interest rates on the mortgage are lower – and so are your payments. But remember, it may cover a thirty-year period. No one can see that far ahead. A bad economy also means that your payments can become very high – maybe even too high. These are excellent when the economy is doing well, but you may need to get another mortgage if the economy goes bad.
Paying Off The Mortgage
The best type of mortgage will enable you to increase your payments, or make additional payments in order to reduce the amount you owe. This means that you will be able to pay off the mortgage early, and save a lot of money. Most mortgages, however, have clauses in them that will limit how much you can pay extra each year, or may not allow it at all. You may need to negotiate with the lender in order to get this put in the agreement.
When going for your mortgage, the best thing you can do to help yourself is to understand as much as possible about mortgages. Then, with that knowledge, shop around and get online quotes so you can compare various offers in order to get the best deal..
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