An absolute title refers to a title to a property that is free of any deficiencies, encumbrances or competing claims.
There are various types of claims that can exist on a title such as prior mortgage, easements, liens, judgments, leases, spousal claims, etc.
As such, an absolute title means that an owner has unequivocal rights to the property and this status cannot be challenged by any party.
We often hear mortgage specialists and financial advisors recommending to home buyers that they should stay conservative and avoid overstretching their finances.
But to be honest, probably no one needs a financial expert to tell them that.
These “experts” are usually loan officers who are afraid that you might default with a higher monthly payment, or insurance agents who want you to spend your extra cash on their insurance policies rather than on the home loan.
An open-end mortgage is a home loan which the lender allows the borrower to draw additional funds from as and when the property value appreciates over time.
The loan principle is therefore raised.
The credit ceiling however, is usually limited with a stipulated loan-to-value so as to prevent homeowners from over leveraging their finances.
Defeasance describes the process in which a borrower is legally released from debt obligations by a lender as the terms of the agreement are properly fulfilled.
This odd but not uncommon situation can arise when a borrower wants to be released from a debt by making full repayment but the lender refuses to allow is as it would negatively affect their projected cash flow and profits from that particular deal.
So the borrower or a new entity buys a portfolio of treasury bonds that is capable of generating the returns comparable to the returns of the mortgage should it not be repaid.