Types of mortgages, the role of interest rate, and the process of foreclosures

W2022 LAW230-204 Business Law
Topic: types of mortgages, the role of interest rate, and
the process of foreclosures
Due Date and Time: 20 Feb, 2022; 11:59 pm
Submitted to: Rafatunnisa Nawaz
Submitted by
Navjot Kaur (A00118003)

Table of Content
MORTGAGE 2
TYPES OF MORTGAGE 2
Open mortgage 2
Closed mortgage 2
Convertible mortgage 2
Hybrid mortgage 3
Reverse mortgage 3
ROLE OF INTEREST RATE 3
Fundamentals of valuing 3
Flows of capital 4
Rates of discount 4
The bottom Line 4
PROCESS OF FORECLOSURE 5
Phase 1 - Payment Default 5
Phase 2 - Notice of Default 5
Phase 3 - Notice of Trustee’s sale 5
Phase 4 - Trustee’s sale 6
Phase 5 - Real Estate owned ( REO) 6
Phase 6 – Eviction 6
REFERENCE 6

2
Types of mortgages, the role of interest rate, and the process of foreclosures
MORTGAGE
It is a loan used to buy or keep a house, land, or other piece of real estate. The borrower
promises to pay the lender over a period of time, usually in a series of regular instalments
divided into principal and interest. The loan is secured by the property. A borrower must
apply for a mortgage through their preferred lender and meet a number of criteria, including
minimum credit scores and down payments. Before they reach the closing stage, mortgage
applications go through an extensive underwriting process. Conventional and fixed-rate loans
are two types of mortgages that differ dependent on the borrower's demands.
TYPES OF MORTGAGE
Open mortgage
An open mortgage is for you if you wish to make high mortgage payments or pay off your
loan entirely without penalty. An open mortgage gives you the greatest amount of freedom.
These homeowners are willing to accept a slight interest rate fluctuation in exchange for the
ability to pay off a portion or the entire mortgage before the term ends.
Closed mortgage
A closed mortgage is a loan with a pre-determined interest rate and term. If a buyer utilises a
closed mortgage, he or she will almost certainly have to pay a penalty to the lender if the loan
is paid off early. The borrower can choose between a fixed rate and a variable/adjustable rate
with a closed mortgage, depending on their needs and preferences. More information on the
various sorts of rates can be found under "Rates."
Interest rates for closed mortgages are often cheaper than open mortgages. Most lenders will
enable borrowers with closed mortgages to make a one-time lump sum payment of up to
10%, 15%, or 20% of the initial loan amount without penalty once a year. This payment is
applied to the principal portion of the debt. Many lenders may additionally allow a borrower
to boost their monthly mortgage payment by up to 10%, 15%, or 20% in addition to the lump
sum payment.
Convertible mortgage
it is a loan that allows homeowners to change the type of mortgage they have during the
length of the loan. A convertible mortgage is the best option for homeowners who want to
start with an open mortgage and then lock into a closed loan. It has lower interest rates than
an open mortgage and can be converted to a closed term. Most lenders can convert a variable
rate mortgage to a fixed rate mortgage if the borrower wants to switch before the term ends.