What is Mortgage Debt

2007-03-08 10:33:40

( Financial )



Debts in General
Before going to mortgage debts, let us lay down some basic definitions. A debt, in financial terms, is any quantifiable monetary value owed to another. Debts can arise from many different obligations. Loans and extensions of credit are the most common sources of debt.

Is Debt a Bad Thing?
Not necessarily. Many people go into debt in order to make a profit in the long run. Businesses borrow large sums of money to fund viable endeavors. However, debts that are mismanaged become a great liability for the debtor and creditor alike. If a debt is not paid on time, the creditor suffers damage. Collection suits are expensive, and even the act of having to demand for payment entails extra costs.

What is a Mortgage Debt?
A mortgage debt is a kind of debt that is secured by a mortgage. A mortgage is a contract that is usually attached to loans. This contract specifies real estate that will secure the loan. If the loan is not paid, the real estate can be sold, and the money used to pay for the loan. The excess of the sale, if any, will go to the landowner.

A mortgage debt arises from any loan with a mortgage as security. The loan may also be referred to directly as a mortgage, because the loan and the mortgage are usually embodied in a single instrument.

How is a Mortgage Debt Paid?
It is paid according to the terms of the contract. Contracting parties have the autonomy to specify how the loan is to be paid. The main caveat is that the contract must adhere to the laws of the land.

Can a Mortgage in Arrears be Refinanced?
Yes it can. There is such a thing as bad credit refinance. When you fail to pay your debts for a sufficient amount of time, the debt will be written off as a bad debt. Usually, a mortgage in arrears will be foreclosed. This means that the land will be sold to pay for your debt. However, before this happens, you can look for a company to refinance your loan. This will entail the drafting of a new loan agreement with the refinancing company. The refinancing company will assume your obligation to pay, in return for a new obligation on your part to pay the company under terms that you can afford. The new loan will involve a longer payment scheme and a lighter periodic payment. This will allow you to get back on your feet while paying off the new loan. There are many factors considered before a refinance loan is granted. The main factor is, of course, your ability to pay.


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