What is purchase-money?
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i've read the online definitions and such of purchase-money mortgages and loans, but can anyone please put it in words that a 10 year old would understand?
What is purchase-money?A mortgage is a lien on real property. A car loan is a lien on personal property. An unsecured loan, such as credit card debt, doesn't establish a lien on anything.
Real property is land, and anything permanently attached to the land. A window air-conditioner is not real property; central air is.
If you can't pay cash for a house you're buying, and most people can't, you sell a mortgage on your house, most commonly to a bank or mortgage company.
You can sell a mortgage on your house at any time, of course, and to anyone willing to buy it. A purchase-money mortage, however, is one sold at the time you buy your house, with the proceeds being used to pay for the initial purchase.
You can sell another mortgage on your house, and use the proceeds to pay off an existing mortgage. Refinancing your house this way is commonly called a "re-fi", and while this mortgage takes the place of the first mortgage, it's not a purchase-money mortgage, because you already owned the property.
Many companies are offering to consolidate your credit cards, etc., in the form of a home equity loan. If you already have a mortgage, this mortgage is a "second mortgage", and if you already have two, it's a "third mortgage", and so on. A third mortgage is ordinarily subordinate to a second mortgage, and a second mortgage is ordinarily subordinate to a first mortgage. It will state in the terms of a mortgage whether it is subordinate to any other mortgage.
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