A package mortgage is a mortgage loan that is structured to cover the purchase of durable personal property as well as real property. This approach can be especially helpful for first-time homeowners, since the arrangement makes it possible to finance the purchase of durable appliances for the home without creating multiple debt obligations to various creditors. As with any type of mortgage arrangement, individuals seeking a package mortgage must meet the criteria set by lenders to receive this type of financing.
While all mortgages provide financing for real estate, the package mortgage makes it possible to acquire a number of durable goods for the home without the need to seek financing from other sources. Most lenders will be somewhat specific in what they define as durable property, usually providing a listing of the types of goods that may be included in the mortgage arrangement. Typical examples of personal property that can be included in a home mortgage arrangement of this type include refrigerators, ovens, washer and dryer sets, and other appliances that are anticipated to last ten years or longer.
One of the main benefits of the package mortgage is that homeowners can purchase the necessary goods for the home without having to buy those items using a credit card or some type of vendor financing that carries a higher rate of interest than the mortgage. Over the years, this arrangement allows the homeowner to save a significant sum in terms of interest payments, while also eliminating the need to keep up with multiple monthly obligations. At the same time, the homeowner still has full use of his or her credit limits with various providers, making it possible to manage the use of the credit cards to better effect.
For the lender, the package mortgage is likely to carry a higher rate of interest than other mortgage loans. This is because the lender is accepting the durable personal property as part of the security for the loan, and thus is also assuming a higher degree of risk. While the interest rate is higher, the figure is usually not so high that the lender is not able to compete with other financing options, making it possible to demonstrate to homeowners why considering a package mortgage is a good idea.
As with any type of mortgage arrangement, prospective homebuyers should look closely at all terms and conditions found within the package mortgage contract. The idea is to obtain the best overall terms possible, given the nature of the property and the financial circumstances of the buyers. When considering a package mortgage, it is also a good idea to look at the actual cost associated with acquiring the durable properties desired for the home, including the purchase price and the interest that would be paid if the appliances were purchased outside the mortgage loan. Only if the buyer is able to ascertain that bundling the purchase of the appliances into the mortgage would save money over time should he or she proceed with pursuing this type of mortgage plan.
