Helpful real estate loan terms and information
Collection Escrow / Loan Servicing
A collection Escrow or Loan Servicing Company is an independent company that provides services for both the borrower and the lender. Their primary function is to receive the borrower’s monthly payments, compute the principal and interest and forward the payment to the lender. In addition, a collection escrow will hold the original loan documents in their file and will release them after the loan is paid off. These companies charge a one-time set-up fee for establishing the collection, as well as a monthly service fee on each payment received. With some mortgage loans, the collection escrow will also collect reserve payments each month from the borrower for both taxes and insurance. These funds are held in their trust account and paid to the appropriate parties when the taxes and fire insurance premiums come due. Both the lender making the loan and the borrower benefit from an independent servicing company. They both know that the loan accounting is being done correctly and that the original loan documents are held in safekeeping.
An equity loan is a loan against the collateral value you have in a particular property. Your equity is the difference between the fair market value of the property and the mortgage balance owed on the property. For example, if your real estate has a market value of $100,000 and you have a mortgage balance of $25,000 your equity in the property is $75,000. On the other hand, if you own the property outright then your equity in the real estate is 100%. Equity loans are considered secured loans since they are backed by the property and will generally have a lower interest rate than unsecured loans. Our equity loans are all first mortgage loans. This means if you have a balance owing on a prior mortgage, we will pay it off at the time we do the new loan so that you only have one mortgage payment.
The loan-to-value ratio is the percentage that a given mortgage amount represents in relation to the value of the property. For example, if your Oregon real estate is free and clear (has no mortgage on it) and is valued at $150,000 and you take out a loan for $75,000, then your loan-to-value ratio would be 50%. Another way to look at it is that you have mortgaged half your property value and have equity remaining of 50%. Mortgage lenders generally have a maximum loan-to-value ratio they will loan to. Some will loan as high as 80% of your property while others, like Gregory M. Russell, will only loan up to 50% of your real estate value.
When a person takes out a mortgage loan on any type real estate the lender will place a mortgage against the title to the property as security for the loan. This is done by recording a mortgage lien in the public records in the county where the real estate is located. The mortgage insures that if the mortgage loan is not paid according to the terms of a promissory note that the lender has the legal right to have the property sold at a public sale for the amount owed to him. Even though the lender has placed a mortgage against your property you still have full use of your property as well as full title. The lender has simply placed a lien on the title. Although the term “mortgage” is commonly used when discussing mortgage loans an actual mortgage is almost never used in the Western United States. The trust deed or deed of trust has taken its place and is now almost universally used in lieu of a mortgage. With a few exceptions the trust deed performs the same function as a mortgage, that of providing the security for the loan being made.
A private lender is an individual person who makes mortgage loans with his own money. The loan is normally secured by the equity in the borrower’s real estate. Private lenders in Oregon are increasingly making up a larger percentage of mortgage equity loans made in Oregon. This increase in private lending is primarily due to tighter lending restrictions imposed by banks and other conventional lenders over the last few years. Private money lenders differ from conventional lenders in that their lending guidelines are in many cases more flexible regarding both the types of real estate they will loan on and the creditworthiness of the borrower. An Oregon private lender will generally loan on any type of Oregon property including land, rental properties, as well as residential and commercial real estate.
Real estate is land, along with any permanently affixed improvements to the land. The improvements can be any attached structure such as a home, garage, barn or other outbuildings. Real estate is also referred to as real property. The opposite of real property is personal property or that which is moveable, not attached to the land. When a borrower takes out a mortgage on their real estate, they are pledging their land and any improvements on the land as security for the loan.
When an applicant applies for a loan the lender will order a title report from a title company. This will show the current status of the real estate being mortgaged. It will show all unpaid liens, taxes and mortgages against the property as well as the current owner of the property. A mortgage lender uses a title report in order to determine whether the property being used is sufficiently clear of liens and mortgages prior to making the loan. After the loan is funded the title company will issue to the lender a title policy insuring the title to the property. The title report and the title policy are an invaluable asset to the lender. Without it, it would be nearly impossible to make mortgage loans. Normally the cost of the title policy is paid for by the borrower as one of the standard costs in obtaining a mortgage loan.
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