To some people, it can sound crazy to learn that many borrowers of home loans need advice on how to find and select the best loans available in the market.
Because how difficult can it be to identify one with the lowest interest rates when the best loans are put side-by-side to each other?
Well the truth is stranger than fiction.
An assumable mortgage is a mortgage contract whereby there are no terms preventing a buyer of the house from assuming the contract of the seller (mortgagor).
In layman terms, it means that when a buyer buys a house from the seller, instead of obtaining his own housing loan from a lender to complete the property purchase, the buyer takes over the existing mortgage of the seller on the house in question.
The buyer then assumes all obligations and responsibilities of the seller. Becoming the new mortgagor in the process.
When interest is earned by a lender on a loan, but not paid by the borrower, it is added to the amount owed.
This is accrued interest. Or sometimes labelled as deferred interest.
For example, when a monthly mortgage payment for $1,000 is due and only $900 is paid by the borrower, the shortage of $100 will be added to the amount owed.
A sub-prime mortgage is a home loan that is specially designed to serve borrowers who do not meet the stringent underwriting requirements of traditional lenders.
Sub-prime loans are so comprehensive that anyone should be able to obtain a mortgage as long as they are able to drag themselves into the office of a mortgage broker to sub-prime lender.
Borrowers however should expect to be charge closing fees and interest rates that are higher than what is generally available on the open market.