Wouldn't it be great if all our financial positions and future investment judgments were always right and positively affective? Our investments always increased in value, and our financial decisions and circumstances never got the better of us....
Now imagine, you woke up one morning, deep in sweat that a horrible dream could somehow become reality? You are behind on your mortgage repayments, your tenants have stopped paying, you have lost your job, the sheriff is at your door and the possibility of losing everything is very real?
Unfortunately, for some people they are living this very dream and without quick financial response the inevitable could about to happen.
Now what would the most immediate and quickest help solution for this problem be called?
In the mortgage world, this quick and most fundable remedy is called a Caveat Short term loan...So what is this and how does it work?
It is a loan taken against your home, investment or commercial security on which there exists a primary mortgage. The offered securities equity is used as collateral for the caveat loan.
However, a caveat loan has less priority compared to the first on the same property.
Refinancing a mortgage with a caveat loan attached is impossible unless the caveat is paid out in full or lifted to assist in the refinance prior to settlement. Once settlement has been completed, the caveat can be replaced once again for a new term.
With most caveat lenders they will only fund to the maximum of 80% equity to value of the security it is placed upon. The interest rates on a caveat loan are higher to that of the first registered loan. This is primarily because of the risk associated with this type of loan for the lender. If you default, you will be paying off the first loan prior to that of the second and as such there is a risk involved in offering these caveat loans.
A caveat loan has either a fixed rate or variable rate paid monthly or if you have enough equity in your security, the interest payable can be capitalized into the loan over the required agreed term. The subsequent lender will quote you a rate depending upon your credit file, security in question, location of security total and the current market trends.
The loan term will vary from 1 month to 24 months depending upon the option you choose and agreed upon with the lender. But in general lending terms, a caveat loan is usually offered over a shorter time period compared to a first loan. The lender will require you to provide an exist option/s and how the caveat loan will be finalized (paid out) at the end of its contractual term.
The great thing about a caveat loan, you get the opportunity to quickly ( within 72 hours) draw on a large sum of equity money quickly for any viable reason. But you cannot overlook the costs and the high interest rate associated with such a specialised loan.
Therefore, prior to applying for a caveat loan, it is important to speak with a specialist finance broker who works with several caveat lenders, so a costing budget can be ascertained, in order to best determine how much it will cost you and how much you can afford to pay in addition to the first mortgage.
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