Buy Your Dream Property with a first mortgage

A 1st mortgage is a primary loan imposed on the property. When a particular real estate is financed by several mortgage loans, the first one is known as the 1st mortgage. HomeSec as the first fund mortgage lender will have the right first to claim the property through foreclosure and sell it to collect the loan debt if the borrower defaults on the funding repayment.

Way of working of 1st mortgage

There are two reasons why people take out first and second mortgage funding on a particular property. When you buy a house, several mortgages can happen either upfront or down the line when living there for a specific period. The best example of a first mortgage loan is home equity. Some buyers implement two loans for buying the asset or property due to its high price.

The 1st mortgage fund covers the massive purchasing price of the home, excluding the down payment. The second mortgage funds will assist the borrower in covering the down payment and other closing costs included in the transaction. Whenever the borrower sells this property or home, the first mortgage lenders will claim their debts from the sale proceedings, and other lenders will get what is left after paying out the first mortgage balance.

Example of 1st mortgage loan

Let us check out the details of a first mortgage loan to understand the funding better. Suppose in 2018 you bought a house for $300000. In 2019, you have to apply for home equity funding to remodel the kitchen. In this case, the funds you have bought your abode are 1st mortgage, and the home equity loan is the second mortgage.

Now, in the middle of 2020, suppose you encounter some rough times and are already three months behind on the repayment of both your financial debts. In this case, the first mortgage lender will begin the foreclosure procedure. After a few months, the 1st mortgage lender will sell the property for $250000. After 2 repayment years, the lender will deduct the outstanding amount of $200000. The remaining $50000 will get passed onto the second mortgage lender.

So your 1st mortgages are fully paid off, but the second one might still be outstanding. The remaining balance by selling the property might or might not cover the entire second mortgage, but there is no other way.

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Advantages of 1ST mortgage loan

Applying and getting approval for the first mortgage is a bit difficult compared to the other funding types in New Zealand. The loan is much more organized than the second fund mortgages and settles in rapid time. This way, you can apply for other loan types after getting the funds from the 1st mortgage. The most common circumstances where you can apply for a first mortgage are as follows.

• Releasing the equity in your house for funding renovations and preparing the asset for selling
• Paying off a sizeable, unexpected and urgent bill
• Accomplishing a tiny residential development or sub-division for covering the costs, including construction before you receive the funds from the sales

Some business owners in New Zealand also consider a short-term 1st mortgage on commercial or residential properties to raise the required funds necessary for a business. Some of the most common uses of a First mortgage loan for business purposes include offering working capital for a short time, covering up the stock purchase, paying off the long due bills, picking up the payments of customer invoices and many more.

The eligible amount of the first mortgage depends on the property equity value you select to submit as collateral against the loan. An asset with a higher equity value will give you a higher mortgage amount. If you have any property with sufficient equity which you have not yet mortgaged anywhere else and registered in your name, you can get hefty funding as a First mortgage loan against it.

At HomeSec, we have easy-to-apply and hassle-free eligibility criteria for all those borrowers who need 1st mortgage funding. To make the application and funding process as seamless as possible, ensure all your submitted documents are legit and ready to get verified. Also, you should have a favourable situation before applying.

The requirements for 1st mortgage

The requirements for 1st mortgage depend on the first mortgage lenders you are selecting. These requirements can affect the following.

• Minimum credit score necessary for qualifying for the funds
• Down payment amount
• Closing cost to be paid by the seller
• Closing cost percentage
• Loan repayment tenure
• Interest rates

The property type also matters when getting the 1st mortgage. You can buy a one to 4 unit house with a 3.5% down payment and a credit score as low as 580. But the property should be in good condition and meet some quality standards of the lenders for qualifying for the loan.

Difference between the second and first mortgage.

The primary difference between these two loan options is the first claim to the asset or property when there is any default. 2nd mortgages include higher interest rates than the first one because of this reason. We have a higher risk of not receiving funds even after selling the property. Thus we protect ourselves in this way.

Another difference between these two funding is the tax code treatment, specifically in federal mortgage tax deduction. You can get a tax deduction on the interest rates of the first mortgage up to some limits.

Apply for a First mortgage from HomeSec at affordable interest rates and buy your dream home today!