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- What Are Netting Escrows & How Does It Work?: The Best Guide - January 2, 2024
- The Secret About Prescriptive Easement: Top Guide 1 Must Know - December 4, 2023
- About Home Equity Loans In Texas And How Can One Obtain It - November 27, 2023
About Package Mortgage
In a real estate transaction, the homebuyer usually pays for the property sales price listed by the seller.
It is a simple transaction where the homebuyer will make a down payment and the rest of the amount will be secured through a mortgage.
However, some new buyers might be a little tight on the budget and they might not be able to spend enough on personal appliances.
In this post, we will understand what a package mortgage in real estate is.
What Is A Package Mortgage?
It is a mortgage that has the home and the personal property inside the home as collateral. In a regular mortgage, the home is considered collateral.
However, in this type of mortgage, both the home and the appliance are considered collateral. The buyer will be getting a mortgage for both the home and the personal property within the home.
Example For A Package Mortgage In A Real Estate
For example, if you are planning to buy a new home for the first time and you are a little tight on your budget where you are unable to spend enough cash on home essential appliances.
You ask your realtor to find a home that has all the appliances required like kitchen essentials, washers, dryers, etc. Once you find such property, you apply for a package mortgage with your lender.
Let’s say that the property is listed at $250,000, the cost of the appliances is $25,000 and you are making a down payment of 20 percent of the total value which is $275,000.
Your lender will consider the loan amount of $220,000 which includes your home and the appliances that are included in that home.
You as a homeowner will be making the payment for the loan borrowing $220,000. In this type of mortgage, the borrower will be unable to sell the item listed in the mortgage without the lender’s consent.
What Are The Pros and Cons Of A Package Mortgage?
The Pros Of A Package Mortgage:
The best thing about this type of mortgage is that you don’t have to spend cash to buy home essentials or appliances.
You can cover the cost of the same in the mortgage and pay them under one unified installment.
If you are an investor and looking to put the property on rent, you will have a fully furnished home to show to your potential tenants where they don’t have to invest in any of the home appliances.
If you are planning to get this type of mortgage as an investor, there is a possibility of getting a higher rent for the property compared to the current market rent in the area.
The Cons Of A Package Mortgage:
If you decide to get this mortgage to buy the property, you would be paying an interest rate on the borrowed amount including the property and the appliances.
You would not be able to sell the items unless you get approval from the lender.
Conclusion
This type of mortgage is a great way to avoid out-of-pocket expenses when you are buying a new property.
However, if you have enough cash to spend on furniture and other home appliances you might want to reconsider your option of getting a package mortgage as you would end up paying interest on the amount of the additional amount of these items.
Check all the possible options before you decide on getting this mortgage so that you can make an informed decision.
