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LSDefine
Simple English definitions for legal terms
future-advances mortgage
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A quick definition of future-advances mortgage:
A mortgage is a way to borrow money to buy a house or property. It's like a promise to pay back the money you borrowed, with interest, over a certain amount of time. If you don't pay back the money, the lender can take the property away from you. There are different types of mortgages, like ones with a fixed interest rate or ones where the interest rate can change. A future-advances mortgage is when part of the loan isn't paid until later.A more thorough explanation:
A future-advances mortgage is a type of mortgage where part of the loan amount is not paid immediately but at a future date. It is a conveyance of title to property that is given as security for the payment of a debt or the performance of a duty and will become void upon payment or performance according to the stipulated terms.
For example, if a borrower takes out a future-advances mortgage for $100,000, they may receive $50,000 upfront and the remaining $50,000 at a later date. This type of mortgage is commonly used in construction loans where the borrower needs funds at different stages of the project.
The future-advances mortgage allows the borrower to access additional funds without having to go through the process of applying for a new loan. However, it also means that the borrower will have to pay interest on the entire loan amount, even if they have not received all the funds yet.