Utah Real Estate Code 57-1-14. Form of Mortgage-Effect
A mortgage of land may be substantially in the following form: MORTGAGE
____ (here insert name), mortgagor, of ____ (insert place of residence), hereby mortgages to ____ (insert name), mortgagee, of ____ (insert place of residence), for the sum of ____ dollars, the following described tract ____ of land in ____ County, Utah, to wit: (here describe the premises). This mortgage is given to secure the following indebtedness (here state amount and form of indebtedness, maturity, rate of interest, by and to whom payable, and where). The mortgagor agrees to pay all taxes and assessments on said premises, and the sum of ____ dollars attorneys’ fee in case of foreclosure. Witness the hand of said mortgagor this _______(month\day\year).
A mortgage when executed as required by law shall have the effect of a conveyance of the land therein described, together with all the rights, privileges and appurtenances thereunto belonging, to the mortgagee, his heirs, assigns, and legal representatives, as security for the payment of the indebtedness thereon set forth, with covenants from the mortgagor of general warranty of title, and that all taxes and assessments levied and assessed upon the land described, during the continuance of the mortgage, will be paid previous to the day appointed for the sale of such lands for taxes; and may be foreclosed as provided by law upon any default being made in any of the conditions thereof as to payment of either principal, interest, taxes, or assessments.
Types of Home Mortgages Available To Buyers
There are three major types of home mortgages – fixed-rate mortgages, adjustable rate mortgages and alternative or combination mortgages. Each of these has its benefits and disadvantages along with different types of lending and interest setups within each major type. A fixed rate mortgage is your standard, typical, mortgage. Its main advantage is that your housing costs are predictable – you know how much you can expect to pay every month, when your mortgage will be paid off and exactly how much it will cost you in interest payments. Typically, a fixed rate mortgage comes in a 30-year term. However, homeowners who are refinancing their homes have increasingly been tapping into shorter 15-year terms, while first time home buyers sometimes consider terms as long as 40 years in order to pay less on their monthly debt. Another popular type of fixed-rate mortgage is the bi-weekly mortgage. Because making your mortgage payments on a bi-weekly basis allows you to make two extra mortgage payments every year (therefore the equivalent of 13 monthly payments instead of the normal 12), you can pay down your mortgage faster and save tens of thousands of dollars on interest alone. The major disadvantage of a fixed rate mortgage is that if you get your loan when interest rates are high, you’re locked in at that rate. So, if interest rates fall, you lose out on that potential interest savings and would then need to walk through the steps of refinancing the loan to get a lower rate.
Adjustable Rate Mortgage
Adjustable rate mortgages become very popular when interest rates are high. Typically, lenders offer a low, introductory interest rate followed by an interest rate that’s based on the market average, or slightly above the prime rate. In this scenario, as interest rates rise and fall, so do your mortgage payments. Bear in mind, though, that the key risk with an adjustable rate mortgage is if the general real estate market rate rises, one’s monthly mortgage payment (on the interest) will rise as well. If you’re part of a family that expects its income to rise over the years, are only planning to own your home for a short period of time, anticipate stable mortgage interest rates in the foreseeable future, or simply want to get into the housing market but the interest rates are simply too high to lock in with a fixed rate mortgage, than an adjustable rate mortgage is for you.
It is possible to obtain mortgages that change their type as they mature. For example, the Super Seven or Two-Step mortgage gives homeowners a low, predictable interest rate for the first seven or ten years of their mortgage. At that point, their interest is reevaluated based on current market conditions. The benefit is a lower interest rate to start, particularly if you plan to sell the home within 7 years. Depending on rates, your interest rate could jump as high as 6 or 7 percent by the end of your term. The type of mortgage you ultimately select for the purchase of a home is a weighty decision that must factor in a number of risks and personal circumstances. Before jumping into the excitement of new home especially for first time buyers you should talk over options with your spouse, other family members, and those who have some expertise in matters of finance and real estate.
Can You Buy a House With a Personal Loan?
Personal loans are not typically used to pay for a house. However, there may be some exceptions in certain situations where it’s not only possible, but it may be a better option than a mortgage loan. If you’re buying a standard single-family home, getting a mortgage is your best bet. Personal loans typically have much shorter repayment terms and higher interest rates than mortgage loans, making them a poor choice in that situation. However, if you’re planning to purchase a very small home or mobile home, where the cost is much lower, a personal loan may be a decent option. In fact, it can be difficult to find a traditional mortgage lender who will lend you money to finance a tiny house or a mobile home. Some lenders market personal loans specifically for use with a very small house or mobile home. If you go this route, however, keep in mind that it will be considered a cash offer. This means that you won’t be using the home as collateral for the loan, and the seller may be more willing to choose you because the sale isn’t contingent on a mortgage process.
Can You Use a Personal Loan for a Down Payment?
If you’re buying a standard home and need a traditional mortgage, your down payment requirement can typically range from 3% to 20%, depending on the lender and the situation. While it may be tempting to use a personal loan to cover this amount, you’ll have a hard time convincing the mortgage lender to accept it. The primary reason for this is that a personal loan increases your debt-to-income ratio (DTI), which can hurt your chances of getting approved. Also, it could be a sign that you can’t manage your money well, which can be a red flag for mortgage lenders. Legitimate uses for a personal loan include consolidating debt, paying medical expenses, starting a business, renovating your home and financing a large expense.
How a Personal Loan Impacts Credit
While getting a personal loan to buy a small house or mobile home can be a good option, it’s important to understand how it might affect your credit. In general, applying for any type of credit can knock a few points off your credit score when the lender runs what’s called a hard inquiry on your credit report. That said, inquiries generally don’t have a lasting impact on your scores. The primary way a personal loan affects your credit is how you handle your monthly payments. If you pay your bill on time every month, the positive payment activity can improve your credit scores. On the flip side, missing a payment or defaulting on the loan can wreck your credit, even if you get to keep the home. To help you stay on track with loan payments, consider setting up automatic payments. Some lenders may even offer an interest rate discount if you do this. Another option is to set up alerts to remind you each month when your payment is due.
Check Your Credit before Applying for a Loan
Regardless of which loan you’re planning to use to buy your home, it’s important to make sure your credit is in good enough shape to qualify for favorable terms. Check your credit score to know where you stand, and look for any areas you might need to address before you apply. You may be able to qualify for a loan with a relatively low credit score. But the higher your score, the better your chances of getting a lower interest rate. And as with any loan, make sure you shop around and compare several lenders to ensure you get the best rate available.
Is a Home Loan an Asset or a Liability?
A home loan can be a great way to finance a property. It allows you to pay for your home over a period of time versus paying cash for it upfront. A mortgage can be an asset or a liability, depending on if you’re the borrower or the lender. A liability refers to a financial obligation that you’re responsible for, such as a debt. An asset refers to an item of value that belongs to you.
Liability for the Borrower
A home loan is a liability, or financial obligation, for a borrower. The bank lends you money to purchase a home in the form of a home loan, also called a mortgage. This is a form of debt. By signing the loan agreement, you accepted liability for the debt and its repayment. The lender expects you to repay that loan and with interest. As the borrower, you generally pay the principal and interest in installments over a set period of years. This liability attaches to all signers of the loan agreement, including the borrower, co-borrowers or co-signers, if applicable.
Asset for the Lender
A home loan is an asset for the lender. The home loan payments are a form of accounts receivable that the lender expects to receive payment on. These receivables are secured by the property itself, which the lender maintains a lien on until the loan is repaid. This is how lenders make money. The lender extends a principal amount to you but charges you interest for the privilege. Alternatively, the lender can make money by selling the entire loan to another company.
The Home Is Your Asset
Although the home loan is a liability, the home itself is generally considered an asset to the borrower. The lender maintains a lien on the property, but you are considered the owner of the home as long as you remain current on your mortgage and other obligations, like property taxes. Since the home is an asset of value, you can make changes to increase the value of your asset, such as home improvement upgrades. You may also be able to access the equity of the property. Equity is the difference between the fair market value of the home and the amount you still owe on it. The equity can be accessed via a home equity loan or a home equity line of credit. However, accessing the equity in your home does result in the creation of an additional debt, which is a liability.
Default is a liability for the borrower and the lender. A default on the home loan generally occurs when you violate the terms of the home loan agreement, usually by missing mortgage payments. Missed payments may incur late payment fees or lead to a foreclosure, where you lose the underlying asset. A default causes the lender to lose revenue and incur collection costs. If a foreclosure occurs, the lender will receive the home; however, the home may not truly be an asset for the lender if the amount owed on the loan is greater than the value of the property. In this case, the lender will suffer a loss unless it is able to either sell the property for enough to cover the amount owed or recoup the total amount owed on the loan from the borrower.
How Interest Rates Affect the Housing Industry
Interest rates in the Utah are determined by a number of factors, including the actions of the Federal Reserve, the health of the economy and the rate at which people are saving money. Given that most home sales are financed through the borrowing of money in the form of mortgages, the housing industry is profoundly affected by changes to these rates.
Interest rates are the rates at which money can be borrowed for a set period of time. The higher the rate, the more money a borrower must pay in the form of interest on the loan. The Federal Reserve sets a rate at which it lends money to banks and other financial institutions, which in turn affects the rate at which they lend to businesses and individuals, such as people seeking a mortgage.
Generally, when the interest rate is lower, people are more likely to borrow money, as doing so will cost them less than at another time. Conversely, when the interest rate is higher, borrowing becomes more expensive and slows. This principle applies to loans that come in the form of mortgages. When interest rates are lower, people are generally more willing to take out a mortgage than when rates are higher.
When mortgage rates are lower, this makes the purchasing of a home more affordable. Consequently, the sales of homes rise as more consumers are able to take out a low-cost loan. Consumers with existing mortgages may attempt to re-finance their mortgage, meaning they trade their current loan for another, cheaper one. In periods of low interest rates, more houses are often built as demand rises, and development companies are able to borrow money at a cheaper rate to finance the construction.
Although the cost of mortgages is closely tied to the interest rate, the price at which homes are sold does not always appear in direct correlation. While low interest rates can raise demand for houses, pushing up the prices of houses, if the price gets too high, demand can cool, causing house prices to plummet.
Not all mortgage rates are fixed at the time that the loan is taken out. With an adjustable-rate mortgage, the interest rate of the loan varies with prevailing interest rates and may change as often as every month. Most adjustable-rate mortgages have their rates tied to an index of financial securities, one that changes with the movement of the market.
Real Estate Lawyer
When you need legal help from a real estate lawyer in Utah, please call Ascent Law LLC for your free consultation (801) 676-5506. We want to help you.
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506