Mortgage Types And Products

Mortgage Types

Pre-Approval Application means your mortgage application is prior to your offer (before you have your target property that needs mortgage). The lender will conditionally only approve the total mortgage amount based on your credit and financial information. After your having an accepted offer, you have to send all documents of accepted offer with property listing information to the lender.  The lender will review the property to decide whether to approve or reject finally. Pre-approval procedure will let you know how much money you can get and how much price of home you can buy. That will reduce the risk of rejection after your offer is accepted, and increase the buying confidence ether to you and the seller.

If you have a target property and want a mortgage, then you need to officially apply for “Approval” application. This application is based on a typical property with legal registration number and documents. When your offer is accepted, this property that has legal registration number and documents can be verified from many source, like website of government and real estate system online (e.g. MLS). After the lender review those information (registration, location, market value, specification and features of property, selling records…), the underwriter of the lender will make a final decision whether to approve or reject your application.

The difference is only on having a target property or not.

Mortgage type is classified to New Mortgage, Refinance and Switch Financing based on the mortgage application. New Mortgage means you apply for a new mortgage on a property that you will buy and is no mortgage for you. E.g. when you buy a home and you don’t have existing mortgage needed to be transferred, then you need to apply for a New Mortgage. Refinancing involves a new mortgage on an existing property typically to replace existing financing, along with additional borrowing from equity. Sometimes it’s called “Equity Take Out”. Switching Financing means mortgage borrower switches or transfers the existing mortgage to a new lender.

From the point of objects, mortgage type can be classified to residential and commercial mortgage. Residential property and personal use mostly is under residential mortgage, and commercial building and/or business use is mostly under commercial mortgage. The mortgage rate between these two is much different. The rate most banks publish on the market is only for residential, not for commercial. Commercial rate is pretty flexible, depends on business length, cash-flow, financial statement, owner’s credit, business credit, relationships with lenders, etc. Mostly, business rate could be known after lender fully review all documents and then make a decision for a rate.

Mortgage Products:

  1. Mortgage Products’ Type: Conventional & High Ratio (Loan-To-Value, LTV > 80%
  2. Mortgage Plans: a) interest only  b) interest accruing  c) interest plus specified principal  d) blended (amortized)
  3. Mortgage Rates: a) mortgage fixed rates  b) mortgage variable rates  c) mortgage capped variable rates
  4. Mortgage Payment Options: a) open/closed  b) amortization  c) accelerated  d) double-up  e) frenquency  f) lump sum  g) skip payment
  5. Mortgage Credit Package: a) home equity line of credit  b) mortgage account
  6. Mortgage Other Features: a) add-on  b) assumable  c) cash back  d) frequent incentive  e) portability
  7. Mortgage Add-Ons: a) critical illness protection  b) mortgage life insurance

All banks and other lenders make the above items from different mortgage groups to form different packages.

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