Mortgage investing is a profitable and attractive business for those who wish to reap all the benefits of real-estate mortgage without the any hassles.
To enter the profitable market or real-estate, you need to learn some of the techniques and also technical terms. Learning would allow you to plan your business, and make the right decisions. When you begin learning the right techniques and strategies of investing you are bound to come across several terms associated with business and investment that you ought to know.
Below are 9 common terms of mortgage investing that you may run into, in your learning process, explained in simple and plain English terms.
1. Promissory Notes:
Let’s start at the basics. A promissory note is a legal document, which is most commonly used when making taking out a loan from a financial institution against a valuable asset. With this document the borrower promises to pay back the money according to their mutual agreement.
2. Mortgage Notes:
The definition of mortgage notes as given by the Business Dictionary is as follows:
Mortgage Notes: “Promissory note that (as a part of mortgage agreement) states the amount and duration of loan, the applicable rate of interest, and makes the signatory personally liable for repayment of the full loan amount according to the terms of agreement.”
So in plain and simple English, a mortgage note is a promissory note or deed of trust that specifies the terms and conditions of the loan, interest rate and the specific length of time. Both the lender and borrowers signs and agrees on this document. The lender holds the document until the debt is paid in full. If the borrower
Kenneth Eric Trent writes in an article on Foreclosure Destroyer that “A mortgage is actually a transfer of an interest in property. While a mortgage is tied to the underlying debt created by the note, it is not a promise to pay the debt. It really isn’t a promise to do anything. Instead, it contains granting language like a deed which gives the lender the right to take the property if the borrower goes into default and doesn’t pay under the terms of the note signed in “BLUE” ink. “
3. Defaulted Notes
Sometimes a deed can become a defaulter. When a note no longer performs according to the original terms and conditions, it becomes a default note. In other words, when a borrower fails to pay his mortgage payments on time, it becomes a defaulted or non-performing note.
These notes are usually promissory notes that are secured by an underlying deed and a piece of property.
4. Senior Lien
When a loan taken out to purchase a property, it becomes collateral for the loan, and the first mortgage of the property is known as the “First Lien”
5. Junior Lien:
Banks will often finance or lend money against a property for the second time. Any loan taken out with the house that has already been mortgaged is called a second mortgage or “Second Lien”
6. Secured Loans:
Lastly, we are all familiar with a secured loan. If you don’t have good enough credit and want to borrow money, sometimes you can get a secured credit card, which means your credit line is only as good as your cash. In real estate, a secured loan is secured by a real property. It’s when a borrower mortgages a house to borrow money against its equity value.
So these are some of the basic terms that you might run into while entering the real estate realm. To learn more, you may enroll in some of our online courses. You can begin learning right from your computer with our online courses. Happy Learning!
Source: Keyhole Academy