Your Privileges as a Mortgage Holder

mortgage

On every commitment there are privileges. Each lender has their own terms and conditions for these privileges, but they are generally as follows: 


Assumption – your mortgage can be assumed by a purchaser,  if they qualify to carry the mortgage.  

The lender must approve this transaction.

An instance where you might do this is if you couldn't sell the real estate, or if the interest rate is lower than what is currently being offered by the lenders.  

If you do an assumption, the purchaser looking to take over the mortgage must be able to provide the difference between real estate fair market value and the amount of the outstanding mortgage. 

Portability – your mortgage can be taken with you to another home, provided that you sell your first home.

This is usually done if interest rates have risen from the time that you purchased your original real estate to the time you are purchasing your new real estate.   If the outstanding mortgage amount stays the same or lowers then you keep the rate you were originally offered.   If you are purchasing a more expensive piece of real estate, then you keep the original mortgage amount at the original rate and on the new mortgage amount you get the current interest rates.  The lender will then blend those amounts together to give you what is called a blended and extended rate - depending on your situation, this can be beneficial. 

Early Renewal – some lenders will allow you to renew your mortgage early. 

Most times this is done when interest rates are coming down, and most of the time you will have to pay a penalty to have this completed.  The penalty is generally just added to the current outstanding mortgage amount.  

Prepayment Privileges — Every lender offers prepayment privileges, as long as your mortgage is not in default or you have not asked for a mortgage payout statement.  

Depending on the lender, you may be able to prepay anywhere from 10 to 20%.  Every lender gives you the option of prepaying the mortgage in a combination of either lump sum deposits with a minimum of $100 partial prepayment, and/or increasing your mortgage payments (as long as you never prepay more than what they allow).  Some lenders indicate when you can prepay or make changes to your mortgage payment, generally you have two options: Either at each anniversary date or during the 12 month period following the interest adjustment date.  The privilege cannot be carried over from previous years. 

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