Every industry has its fair share of confusing terms that are hard for outsiders to keep track of. And the mortgage industry is no exception. In fact, it may be even worse than most!
When you go to get a mortgage, or refinance one, there are no shortage of terms you may come across and have no idea what they mean. One of them in the mortgage industry is the term “package mortgage”?
Below you’ll find a clear, plain English answer to the question “what is a package mortgage?” as well as a couple of situations where getting one makes sense.
What Is A Package Mortgage?
Before we talk about what a package mortgage is, we have to get things straight about what a “regular” mortgage is. A mortgage is basically a real estate loan. It’s a loan that covers the property you want to buy and the house, condo, building, etc. on that property.
Sometimes that may include some built in kitchen appliances like the dishwasher and oven. It may even include a refrigerator. But, for the most part, the regular mortgage covers the cost of the home itself and property it’s on.
A package mortgage is different in that it not only includes the real estate but includes personal property in the home as well. So, if you buy a home that comes furnished, you can take out a package loan to cover the house as well as the furnishings in that home.
In this case, keep in mind, you won’t technically own the furniture so can’t sell it/get rid of it. The mortgage company owns it all until the mortage is fully paid off.
One of the benefits of this type of mortgage is the interest rates. If you were to finance furniture through a store or credit card, the interest rates are typically high. However, if you can include that furniture in a pocket mortgage, the interest rates should be much lower.
More on What’s Included in a Package Mortgage
All types of furniture may be part of what a package mortgage covers. This could include cabinets, a dining set, couch, and more. But it could also include other things too such as electronics and appliances. So things like refrigerators, washing machines, dryers, big screen TVs and more may also be part of a package mortgage.
One important thing to note here. A package mortgages can include furniture and personal property already found in the house you buy. It typically does not include funds that you can use after getting the mortgage to buy new furniture for the home.
When is a Package House Loan Recommended?
There are a couple of situations where a package mortgage typically makes sense. The first one is for those who plan to buy a furnished vacation home. That way you don’t have to go out and buy new furnishings for the home. You can just move in and relax!
The other situation where one makes sense is if you get a fully furnished condominium. After all, it reduces the need for you to purchase anything your condo including beds and couches. Again, you can just move in and not have to worry about that stuff.
In short, a package mortgage is a mortgage that loans not only the real estate, but also the furnishings in it.