Sonic Realty

Understanding the Right of Encumbrance in Property Ownership

Understanding the Right of Encumbrance in Property Ownership

Introduction: The right of encumbrance is a fundamental aspect of property ownership that allows individuals to pledge their property as collateral for loans or other obligations. This blog post will delve into the right of encumbrance, its implications for property owners, and the different types of encumbrances that may affect real property.

Understanding the Right of Encumbrance: The right of encumbrance grants property owners the legal authority to subject their property to various financial obligations or restrictions. These encumbrances can affect the property’s title and marketability or value. While encumbrances can limit certain rights associated with property ownership, they are essential for facilitating financial transactions and securing credit.

Implications for Property Owners:

  1. Access to Financing: The right of encumbrance enables property owners to access financing by using their property as collateral for loans or mortgages. Lenders may require encumbrances such as mortgages, deeds of trust, or liens to secure their interests in the property and mitigate the risk of default.
  2. Property Development: Property owners may use encumbrances to finance property development projects or improvements. By pledging their property as collateral, owners can secure funding for renovations, expansions, or construction projects that enhance its value.
  3. Risk Management: Encumbrances can serve as a form of risk management for lenders and creditors, providing reassurance that their interests in the property are protected. Liens, for example, give creditors a legal claim against the property in case of default, ensuring they can recover their debt through foreclosure or other legal remedies.
  4. Legal Obligations: Property owners may encounter involuntary encumbrances imposed by law or court order, such as tax liens, judgments, or easements. These encumbrances can restrict certain rights associated with property ownership, such as the right to sell or transfer the property freely.

Types of Encumbrances:

  1. Mortgages: A mortgage is a common form of encumbrance that allows lenders to secure loans with real property as collateral. In default, the lender may foreclose on the property to recover the outstanding debt.
  2. Liens: A lien is a legal claim or charge against property used to secure the payment of a debt or obligation. Common types of liens include tax liens, judgment liens, and mechanic’s liens.
  3. Easements: An easement grants someone the right to use another person’s property for a specific purpose, such as accessing a shared driveway or utility easement.
  4. Covenants: Covenants are legal restrictions or obligations imposed on property owners by deed or contract. These may include land use, building height, or architectural style restrictions.

Conclusion: The right of encumbrance is an essential aspect of property ownership that allows individuals to leverage their property for financing, development, and risk management purposes. Understanding the different types of encumbrances and their implications is crucial for property owners, lenders, and anyone involved in real estate transactions. By navigating encumbrances effectively, property owners can maximize the value and utility of their real property while mitigating financial risks.

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DJ Peterson

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Affiliated Business Arrangement Disclosure Statement
This is to give you notice that Sonic Loans Inc., Sonic Title Agency LLC, and Sonic Realty LLC have a business relationship. The nature of the relationship between the Referring Party and the provider(s), including percentage of ownership interest, if applicable, is: Sonic Loans Inc., Sonic Title Agency LLC, and Sonic Realty LLC are all 100% owned by the same party. Because of this relationship, this referral may provide any of the above parties with financial or other benefit.
A. Set forth below is the estimated charge or range of charges for the settlement services listed. You are NOT required to use the listed provider(s) as a condition for settlement of your loan on, or purchase, sale, or refinance of, the subject property.
THERE ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE SERVICES.
Provider and Settlement ServiceCharge or Range of Charges
Sonic Realty LLC1%-6% of purchase price
Sonic Title Agency, LLC Title Insurance Policy: $950 - $1706 on a $250,000 property. (Rates vary and are dependent on the state, selling price, and loan amount on the property.)
Title Search Fee: $250 - $325 (where applicable)
Closing Fee: $450 - $650
Sonic Loans Inc.

This company provides various real estate mortgage loan origination activities either as a third-party originator or a mortgage broker, including loan pre-qualification, competitive bid process (when providing third-party origination services), loan origination, loan pre-approval, loan structuring, processing, and closing.

Loan Origination Charge: 0-3 % of loan amount (may include 3rd party fees)
Loan Discount Fee/points: 0.5%-6% of loan amount.
Application/Processing Fee: $0.00 - $875.00
Flood and tax service: $0.00 - $95.00
Underwriting Fee: $0.00 - $1295.00
Document Review Fee: $0.00 - $400.00
Appraisal Fee: $0.00 - $850.00
Credit Report Fee: $0.00 - $135.00

Actual charges may vary according to the particular lender selected, the particular services provided, and the underlying transaction, borrower selections, etc. Some or all of these fees may be charged by third parties and/or the Member Mortgage Lender/Mortgage Broker. The Member Lenders and Mortgage Brokers have agreed to pay a fee ranging from 0.5% to 2.75% of the loan amount to Sonic Loans in connection with a range of loan origination services provided by Sonic Loans to the Member Lender/Mortgage Broker. The fees are paid either directly to Sonic Loans by the Member Lender/Mortgage Broker or billed directly to you at closing.
B. Set forth below is the estimated charge or range of charges for the settlement services of an attorney, credit reportingagency, or real estate appraiser that we, as your lender, will require you to use, as a condition of your loan on this property, to represent our interests in the transaction.
Sonic Loans Inc. provides mortgage lender/broker services. Sonic Realty LLC provides real estate brokerage services. Sonic Title Agency LLC provides title insurance and settlement services.

Provider and Settlement ServiceCharge or Range of Charges
Appraisal Fee$0-$800
Credit Report Fee$63-$125
 Actual charges may vary depending on the lender and loan program selected which can be found on your loan estimate.
ACKNOWLEDGMENT
I/we have read this disclosure form and understand that Sonic Loans Inc., Sonic Realty, LLC, or Sonic Title Agency LLC are referring me/us to purchase the above-described settlement service(s) and may receive a financial or other benefit as the result of this referral.