Unencumbered property refers to property that has been fully paid off, has no liens placed on it, and not subjected to any claims by creditors.
When a mortgage is fully paid off, the property is usually an unencumbered property unless some third parties have placed unique liens on it.
The owner now legally owns the house outright and no loans are secured against it.
The costs of closing a loan with a lender refers to the total fees that must be paid in cash by the borrower, property seller, and sometimes even by the lender.
Because these closing costs of loans can often be confused with the closing costs of real estate transactions, it is also often described as the settlement costs.
The closing costs items can typically be split into 4 categories:
A wraparound mortgage is a structured loan transaction where the home seller continues to be responsible for the existing mortgage.
This means that even though the ownership of the property changes hands, the previous owner continues to be the borrower of the existing mortgage.
In effect, the seller is financing the purchase of the buyer.
When interest is due and not fully paid for, it is added to the outstanding balance of the loan.
This is generally referred to a accrued interest. But in the world of mortgages, it is professionally referred to as negative amortization.
This unusual but not uncommon scenario can occur in various ways.