1st mortgages-The Best way to refinance your Home
A first mortgage is secured finance, where a borrower offers a property or their home as a security to a lender. It is one of the best ways to get funding against your asset as the interest rates remain low compared to other loan forms like caveat or second mortgage funding. According to the recent Australian census statistics, almost 35% of the homes in the continent have a first mortgage on them.
How Does First Mortgage Operate?
The First mortgage loan works in the following way.
Signing a contract that will give the lender authority as a lien on the property
Lien means a lender will have the right and authority to possess the mentioned asset in the contract until the borrower can repay the debt.
The contract will then get registered in the appropriate Territory or state government department.
The borrower has to pay a registration fee for the 1st mortgage contract, which is less than 200 dollars in Australia.
The lender will get registered on the certified property title.
The borrower cannot sell the asset or the house without giving a title certificate to the buyer to indicate that the property is debt-free. It is only possible when the borrower has to repay every loan outstanding to the lender.
Primary Differences between first and second mortgages
A second mortgage loan comes after the first mortgage from the repayment perspective. When the borrower applies for the second mortgage loan, the lender of this loan will have secondary rights to the asset when the borrower defaults in making the repayment. The first mortgage lender will have priority over the top of the second mortgage lender when the borrower will sell their asset for recouping the remaining debt. It is particularly applicable when the borrower fails in repaying the loan amount.
The second mortgage lender will receive the leftover funds from the property payments. Most lenders will not offer second mortgage loans to the borrower since they involve more risk. Even if they provide this loan, the interest rate will be much higher than the first mortgage. Also, the borrower will not get any loan approval without getting permission from the first mortgage lender.
When to use the funds acquired from the 1st mortgages?
First mortgage funding is used for financing the owner-occupied residential investment assets, including those for the bridging finance. However, first mortgages can also get used for:
1. Development of the assets or properties
First mortgage funding is becoming highly popular for property projects development. For instance, it is usual for the property developer to buy land with capital. The borrower will use that piece of land as the first mortgage loan security for financial work at an interest rate lower than the other financial solution. Many townhouse developments and multiple residential complexes get funded through first mortgage loans. Some properties are pre-sold under the construction phase for repaying the funds and maintaining proper cash flow.
2. Other financial and business requirements
Funds from the first mortgages can also be used for other company or business purposes apart from property development. It includes:
● Purchasing a new franchise
● Operation expansion of any business
● Funding any new premises of the commercial property
● Purchasing any business equipment
Eligibility Criteria for the First Mortgage Funding
You will get the loan approval for first mortgage funding if you meet the following criteria.
● Should be a permanent citizen of Australia
● The borrower must be above 18 years of age.
● A single individual with an income of 125000 dollars and couples with an income of 200000 dollars are eligible for this loan type for residential purchases
● The borrower should have a deposit of 5 to 20% of the property values.
If you are also searching for a reputed 1st mortgages lender who will offer you the best financial solution at lower interest rates, LoansOne is perfect for you. Call any of our financial specialists and know more about this loan type.
Call us now at 1300 524 472 to learn more about our secured short-term business loans, or simply take 60 seconds and apply now.