RE: What is mortgage and how can you have two mortgage?

What is mortgage?

How do some people have two separate mortgage payments?

Why would you need mortgage insurance?

Sorry, i thought i knew what it all was then after reading up on everything i just got extremely confused… someone help lol THANK YOU

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2 Answers

When you get money from a bank/credit union to buy a house they give you a mortgage which is a promise to pay and a schedule to do so.

Some people who are cash strapped take out a second mortgage to get money to help themselves out. Not a good idea if you can avoid it. It just means you owe more money on your house.

Mortgage insurance is something that says if things get rough whatever this will back you up so you don’t lose your home.

While some say that this is for the lender it is true that the bank/credit union makes the borrower take the insurance out to cover situations when the mortgage can’t be paid. So, in reality it is something the person taking the mortgage out has to do to cover a possible scenerio of them not being able to pay the mortgage.

From wikipedia:

For example, Mr. Smith obtains a mortgage loan that exceeds 80% (the typical cut-off) of his property’s value and/or sale price. Because of his limited equity, the lender requires that Mr. Smith pay for mortgage insurance that protects their institution against his default. To obtain a mortgage loan insured by the Federal Housing Administration, Mr. Smith must pay a mortgage insurance premium (MIP) equal to 1.5 percent of the loan amount at closing. This premium is normally financed by the lender and paid to FHA on the borrower’s behalf. Depending on the loan-to-value ratio, there may be a monthly premium as well.

Star Answered on April 12, 2020.
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