What To Consider Legally Before Signing For A Mortgage

Your signature serves as a symbol of proof of your agreement on a contract. Thus, signing your signature on a contract can make you legally bound to the terms stated in it. It would seal any deal in an agreement and would require you always to perform your end of the terms stated. The same with every legal dealing that you come across, you should scrutinize every single detail. When you would want to enter a mortgage loan, you would need to do your part of understanding everything before you even consider signing them. After scrutinizing each detail, you also need to consult a lawyer to ensure that you understand everything correctly.

Things That You Should Consider

1. You should know the different types of loans.

You, as a borrower, must take time to learn and understand the features of different loans. Doing this will enable you to choose the type that suits you best.

Here are some types of loans:

• Fixed rate mortgage loan

With this loan, you’ll have the same interest for your whole repayment period.  Thus, your monthly payment will never change month after month and year after year.

• Adjustable- rate mortgage loan

This loan, your interest rate would adjust or change from time to time. It will typically change each year after your initial period. The initial period can either be your first three years, five years or depends on your agreement with the lender.

• Conventional home loan

This loan is not guaranteed or insured by the federal government in any way.

• FHA loan

The FHA (Federal Housing Administration) mortgage insurance program is headed by the HUD (Department of Housing and Urban Development). This caters to all kinds of borrowers and ensures your lender against any loss because of your default.

• VA loan

With the U.S Department of Veterans Affairs (VA), you’ll be able to get a loan offered to military service members and their families. This is also guaranteed by the government, which means that your lender would be refunded if there will be losses if you default.

• USDA/RHS loan

This loan is offered by United States Department of Agriculture (USDA). It’s available to rural borrowers that can meet their income requirements.

• Conforming loan

The loan is bought from a lender and is sold via Wall Street. The government-controlled corporations such as Fannie Mae and Freddie Mac purchase the loan. They’ll establish limits on the amount of the credit that you can get.

• Jumbo loan

Government-controlled corporations also buy this; however, the amount exceeds the conforming loan. Your lender has a higher risk since the amount of money involved is higher. You must have an excellent credit history and provide a larger down payment to get this loan.

2. You should know how much your interest will be during the entire repayment period.

The interest rate per annum that you would have varies from every lender, and it would also change from time to time during the whole length of your loan. However, even if there are variations, you’d still be informed about on the letter of offer that you’ll receive.

You should always:

• Compare ELRs
• Ask for the product disclosure sheet
• Enquire about factors may affect your base rate
• Observe your monthly repayment amount
• Assess the capabilities the affordability of your loan

3. You should figure out what length of loan fits you best.

The length of your loan would vary on different factors and your preferences.

Factors that can affect the length of your loan:

• Your age
• Your credit profile
• The interest rate you’re comfortable with

You should remember that the amount of your monthly payment would be significantly affected by the length of your loan. The more years you have on your term, the higher your interest rate will be.

4. You should ask what the different security documents they require are.

Residential properties can come with or without a title. The requirements for residential purposes with titles differ with those without titles.

The requirements for a residential property with a title are:

• Charge instrument in Form 16A
• Charge Annexure
• Facility Agreement

The requirements for a residential property without a title are:

• Deed of Assignment
• Power of Attorney
• Facility Agreement

You will be required by your lender additional security documents if they think that your financing background is not established.

The additional requirements could be:

• Guarantors
• Assignment of rental proceeds
• Charge over the fixed deposit

5. You should figure out the loan amount you’ll get.

The total amount that you would get may not be as much as you thought it would be. You should ask your lender how much will be the actual amount you’ll receive.

The total amount you can qualify for may be affected by:

• Mortgage Reducing Term Assurance (MRTA)/Mortgage Reducing Term Takaful (MRTT)
• Valuation fees
• Legal Costs

If you want to get the exact amount you’re expecting, you can pay these costs upfront. However, if you opt to magnify an additional loan amount to pay for these costs, your monthly payment would increase.

Consult Before You Sign

Make sure to consult a real estate lawyer before you sign any document in regards to your mortgage.Your agents may seem fantastic, but their pitches should not be the basis of your decision. You should know that even if the contracts are well written, they are written in favor of your lender. However, with the help of your lawyer, you’ll be able to figure out if the terms that are being given to you would fit you and would be favorable to you in the long run.

Conclusion

Getting a mortgage is one of the most important decisions you’ll ever make. The documents for housing loans are produced by financial institutions and are made sure to be standardized. However, they vary from every lender and every kind of borrower. This is why, if you’re offered a mortgage, you need to know what to consider legally before signing a mortgage. If you need someone who can provide you legal assistance, you may click here to obtain more information.

Danielle Grate

Daniel Grate is a professional writer in the law industry. She currently writes pieces on various law topics for the common reader. In her spare time she spends quality time with her family and friends.