Advertisement: Mortgages involve two critical time frames; the amortization period and the term of the loan. The term of the loan could be just as long as the amortization period that is usually 25 or 30 years that determines the size of your monthly payments. If you have a longer amortization period, then it means your monthly payments are smaller as the payments are spread out over more time. The loan term is usually only 2 to 3 years as you should have an opportunity to refinance at more preferable interest payment terms available on the open market instead of a bad fate rate at 10% or higher for the entire 25 year journey. The rate may go down to 3% in the next 7 years while your current rate is 5.7%. Click here.

Advertisement:   Mortgages involve two critical time frames; the amortization period and the term of the loan.  The term of the loan could be just as long as the amortization period that is usually 25 or 30 years that determines the size of your monthly payments.  If you have a longer amortization period, then it means your monthly payments are smaller as the payments are spread out over more time. The loan term is usually only 2 to 3 years as you should have an opportunity to refinance at more preferable interest  payment terms available on the open market instead of a bad fate rate at 10% or higher for the entire 25 year journey.    The rate may go down to 3% in the next 7 years while your current rate is 5.7%.  

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The amount of the mortgage loan is generally based on the amount needed to complete the purchase of the property.   Your down payment may be $30,000.00.  Your home purchase price is $700,000.00 so you need a mortgage loan for $670,000.00.  When your loan term expires in 2,3 or 5 years, you need to refinance for the new interest rate  so you deduct the payments you made over the last three years that amounts to $200,000.00 for example. Your total now owing is $570,000.00.  The market value may have gone up to $910,000.00.  You are not refinancing based on new market value.  You are already the owner and you are not buying the home again.   But, if you were selling the home, you stand to gain $210,000.00 in equity.   You are not selling but refinancing as the loan term expired and happily the market rates went down where you have an opportunity to achieve a lower monthly payment per month with a lower interest rate. Even if the property is worth more at the time of refinance, you would not increase the loan to match the new valuation. The mortgage is already registered on title for the original amount and it  would be in the bank's interest to maintain  the mortgage at the same and lower amount when, if something goes wrong,  it would be the bank's burden.  If the owner wants to seek a home equity loan, they can do so. If you are changing lenders, then they might consider a higher loan amount based on the equity with disposable cash made available to the owner for the difference so it's like a home equity loan and mortgage combined to fulfil the opportunity that the new home value presents along with the lower interest rate. It is also possible that while your home could go down in value, the rates could go up by the time you have to consider renewing and refinancing your mortgage based on the new rate.  Did you know taking a photo of a lifeguard stand, a public  monument, a public library building or a public library book is not a criminal offence?  

There are some scenarios now being addressed that involve the miscommunication of the mortgage principles noted above as governed by common law and statute the authorities are addressing them accordingly under the full gamut of the law with enforcement powers involving arrest and incarceration.  Any miscommunication of these principles where a client or customer is impacted by that advice disinformation  may amount to civil tort liability under the Hedley Byrne line of cases involving negligent misstatement.  They will not hesitate.  You're going down if you get this to go sideways. 

Warren A. Lyon. 

Angel Ronan Lex Scripta™.   

 

  

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