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LSDefine
Simple English definitions for legal terms
self-liquidating mortgage
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A quick definition of self-liquidating mortgage:
A self-liquidating mortgage is a type of loan where the borrower pays both the interest and a portion of the principal in each payment. By the end of the loan term, the borrower will have fully repaid the loan. This is different from other types of mortgages where the borrower may have to make a large lump-sum payment at the end of the term. Self-liquidating mortgages are also known as amortized mortgages.A more thorough explanation:
A self-liquidating mortgage is a type of amortized mortgage where the borrower pays both the interest and a portion of the principal in each periodic payment. By the end of the mortgage term, the borrower will have completely repaid the loan. This type of mortgage is also known as an amortized mortgage.
For example, if a borrower takes out a 30-year self-liquidating mortgage for $200,000 at a fixed interest rate of 4%, their monthly payments will be calculated to pay off the loan by the end of the term. Each payment will include a portion of the principal and interest, with the amount of interest decreasing as the principal is paid down.
This type of mortgage is beneficial for borrowers who want to ensure that they will completely pay off their loan by the end of the term. It also allows borrowers to build equity in their home over time.