Real estate finance

A (first) mortgage is a document that gives the lender a right, or lien, tot the title of the property that is pledged as security to the loan. Florida is a lien state, meanting the title of the property remains with the mortgagor (buyer, investor, owner).

Primary lenders are commercial banks, savings associations (thrifts), credit unions, mutual savings banks, mortgage bankers, and life insurance companies. These primary lenders use middlemen to originate new mortgage loans for borrowers: mortgage brokers and mortgage bankers fulfill this role.

For foreign nationals, non-residents up to 70-80% can be financed, being a convential mortgage. A high ratio mortgage or insured mortgage (PMI mortage) results in higher costs. We advise to borrow in US currency due to limitation of the currency risk in case of fluctuating currency exchange rates.

After pre-qualifying and pre-approval the loan application is made after signing the sales contract for the purchase of the property. A credit evaluation and property appraisal is executed as conditions to the loan approval.

Lending criteria involve your credit rating, income and assets. Foreign buyers may use stated income and stated assets forms.

The types of mortgages that are typically available to prospective buyers  are:

(1) Conventional: With a conventional mortgage, the lender obtains a lien or defeasible legal title to the property in return for the payment of the amount of money lent.

(2) FHA mortgage: An FHA mortgage is a conventional mortgage which is insured in whole or in part by the Federal Housing Authority.

(3) Purchase money mortgage: A purchase money mortgage is one that is given to secure the loan which is used to buy the property. A first (senior) mortgage on the property has priority over any second or subsequent (junior) mortgages on the property; the senior lender has a more secure interest in the event of a default since the senior obligations are paid first in the event of foreclosure and sale.

(4) Adjustable rate mortgages: An adjustable rate mortgage (often called an "ARM") offers a fixed initial interest rate and a fixed initial monthly payment. After the initial period is over, the rate and term of the mortgage can be modified at predetermined times under the agreement to reflect the current market mortgage rates.

There are other mortgage options, such as balloon mortgages, shared-equity mortgages, biweekly mortgages, reverse mortgages, and buy downs.

1. Fixed Rate: These fix your interest rates for the first 2-5 years, however once this time period expires, your monthly payments return to your lenders standard variable rate (SVR). This means you can budget accurately without having to worry about a sudden increase in your monthly payments.
2. Variable Rate: The repayments fluctuate with the lenders SVR, which often results in you paying more than you would with other mortgage types.
3. Capped Rate: This allows you to know the maximum amount you will have to pay, and payments will fall if the interest rate drops.
4. Discounted rate: These have a fixed time over which the rates will be reduced, which helps keep costs low in the early years of the loan.
Redemption penalties: Fixed, variable and discounted rate mortgages often have penalties if you stop the mortgage halfway through repayments. These could be a whole six month's interest payments. Always ask about redemption payments when getting a mortgage and read all the small print.
There are three main ways of repaying your mortgage:
Repayment mortgage
The most popular method, this is where you repay your mortgage over a set period of time (normally 25 years). For the first few years of the mortgage most of your monthly repayment is the interest on the loan and only a small amount is repaying any capital. After some time, depending on how much you pay each month, you repay more and more capital, and less interest. You are guaranteed to pay off the mortgage, assuming that you make all the payments on time.
Interest-only mortgages
Here the borrower only repays the interest on the loan each month, which means the debt doesn't ever reduce. The borrower also takes out a saving scheme of some sort that builds up a lump sum to eventually pay back the debt. There are three main types of saving scheme:
• Endowment Policy: You pay cash into an endowment policy, obtained from an Insurance company or independent financial advisor (IFA), throughout the mortgage term.
• ISA Mortgage: An Individual Savings Account that can be sorted out through banks, building societies, insurance companies or from and IFA. In this case the savings money is paid into an ISA and that money is then invested on the borrower's behalf.
• Pension mortgage: Here the savings scheme is a personal pension and thus untaxed. Like the ISA these can be obtained from banks, building societies, insurance companies or from an IFA. The money paid into the pension will be invested on the borrower's behalf to eventually pay back the debt.
You can also have an interest only mortgage without a savings plan however this is rare and you need to prove you are expecting a lump sum of cash to repay the bulk debt such as an inheritance.

Costs and discount points.
Costs may involve loan origination fee, commitment fees, take-out commitment and servicing fees.