There are millions of Americans throughout the country who have only been able to purchase a home because they applied for and were approved for a mortgage. Obtaining a mortgage to purchase property is so common as to be almost taken for granted in every residential real estate transaction. But, even as South Florida residents go through the process of applying for and obtaining a mortgage, they may not understand all of the terms involved. For instance, what is a “security interest” with a residential mortgage?
A “security interest” is, essentially, the difference between a secured and unsecured loan. A mortgage, like a car loan, is obtained by representing to the lender what will be purchased with the money that is to be loaned: a home. Prior to being approved for a mortgage the lender will want an appraisal of the property in question to ensure that it is worth as much, or more, than the borrower intends to pay for the property. Why? Because if the borrower defaults on the loan by missing payments, the lender then has the right to seize ownership of the property in question and sell it to satisfy the debt.
The “security interest” is that part of the mortgage agreement that allows the lender to have an interest in the property even after the real estate transaction is complete. Yes, the buyer owns the home, but that ownership is subject to the mortgage agreement that monthly mortgage payments be paid back in full and on time.
When mortgage payments aren’t paid on time, or at all, the lender has the right to begin the foreclose process. Those South Florida residents who find themselves facing this type of situation may need to get more information about their legal options.
Source: Investopedia.com, “Security Interest,” Accessed Nov. 20, 2016