A mortgage loan, also referred to as a mortgage, is used by purchasers of real property to raise funds to buy real estate; or by existing property owners to raise funds for any purpose while putting a lien on the property being mortgaged. The loan is “secured” on the borrower’s property. This means that a legal mechanism is put in place which allows the lender to take possession and sell the secured property (“foreclosure” or “repossession“) to pay off the loan in the event that the borrower defaults on the loan or otherwise fails to abide by its terms. The wordmortgage is derived from a “Law French” term used by English lawyers in the Middle Ages meaning “death pledge”, and refers to the pledge ending (dying) when either the obligation is fulfilled or the property is taken through foreclosure.[1] Mortgage can also be described as “a borrower giving consideration in the form of a collateral for a benefit (loan).
Mortgage borrowers can be individuals mortgaging their home or they can be businesses mortgaging commercial property (for example, their own business premises, residential property let to tenants or an investment portfolio). The lender will typically be a financial institution, such as a bank, credit union or building society, depending on the country concerned, and the loan arrangements can be made either directly or indirectly through intermediaries. Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably. The lender’s rights over the secured property take priority over the borrower’s other creditors which means that if the borrower becomes bankrupt or insolvent, the other creditors will only be repaid the debts owed to them from a sale of the secured property if the mortgage lender is repaid in full first.
In many jurisdictions, though not all (Bali, Indonesia being one exception[2]), it is normal for home purchases to be funded by a mortgage loan. Few individuals have enough savings or liquid funds to enable them to purchase property outright. In countries where the demand for home ownership is highest, strong domestic markets for mortgages have developed.
Refinancing may refer to the replacement of an existing debt obligation with another debt obligation under different terms. The terms and conditions of refinancing may vary widely by country, province, or state, based on several economic factors such as, inherent risk, projected risk, political stability of a nation, currency stability, banking regulations, borrower’s credit worthiness, and credit rating of a nation. In many industrialized nations, a common form of refinancing is for a place of primary residency mortgage.
If the replacement of debt occurs under financial distress, refinancing might be referred to as debt restructuring.
A loan (debt) might be refinanced for various reasons:
- To take advantage of a better interest rate (a reduced monthly payment or a reduced term)
- To consolidate other debt(s) into one loan (a potentially longer/shorter term contingent on interest rate differential and fees)
- To reduce the monthly repayment amount (often for a longer term, contingent on interest rate differential and fees)
- To reduce or alter risk (e.g. switching from a variable-rate to a fixed-rate loan)
- To free up cash (often for a longer term, contingent on interest rate differential and fees)
Refinancing for reasons 2, 3, and 5 are usually undertaken by borrowers who are in financial difficulty in order to reduce their monthly repayment obligations, with the penalty that they will take longer to pay off their debt.
In the context of personal (as opposed to corporate) finance, refinancing multiple debts makes management of the debt easier. If high-interest debt, such ascredit card debt, is consolidated into the home mortgage, the borrower is able to pay off the remaining debt at mortgage rates over a longer period.
For home mortgages in the United States, there may be tax advantages available with refinancing, particularly if one does not pay Alternative Minimum Tax.
Newark
Newark (/ˈnuː.ərk/[23] or also locally /nʊərk/[24]) is the most populous city in the U.S. state of New Jersey and the seat of Essex County.[25][26] As one of the nation’s major air, shipping, and rail hubs, the city had a population of 277,140 in 2010, making it the nation’s 67th most-populous municipality, after being ranked 63rd in the nation in 2000.[14] For 2015, the Census Bureau’s Population Estimates Program calculated a population of 281,944, an increase of 1.7% from the 2010 enumeration,[13] ranking the city the 70th largest in the nation.[27] Newark is the second largest city in the New York metropolitan area, located approximately 8 miles (13 km) west of lower Manhattan.
Settled in 1666 by Puritans from New Haven Colony, Newark is one of the oldest European cities in the United States. Its location at the mouth of the Passaic River (where it flows into Newark Bay), has made the city’s waterfront an integral part of the Port of New York and New Jersey. Today, Port Newark-Elizabeth is the primary container shipping terminal of the busiest seaport on the American East Coast. In addition, Newark Liberty International Airport was the first municipal commercial airport in the United States, and today is one of its busiest.[28][29][30]
Several leading companies have their headquarters in Newark, including Prudential, PSEG, Panasonic Corporation of North America, Audible.com, IDT Corporation, and Manischewitz. A number of important higher education institutions are also located in the city, including the Newark campus of Rutgers University (which includes law and medical schools and the Rutgers Institute of Jazz Studies); the New Jersey Institute of Technology; and Seton Hall University’s law school. The U.S. District Court for the District of New Jersey sits in the city as well. Local cultural venues include the New Jersey Performing Arts Center, Newark Symphony Hall, The Prudential Center and the Newark Museum.
Newark is divided into five political wards; the East, West, South, North and Central wards and contains neighborhoods ranging in character from bustling urban districts to quiet suburban enclaves. Newark’s Branch Brook Park is the oldest county park in the United States and is home to the nation’s largest collection of cherry blossom trees, numbering over 5,000.[31][32][33][34]