A mortgage rider spells out additional terms for the mortgage that you won't find in the main mortgage papers. Your lender will require a rider if your loan has special conditions, terms or restrictions that are too long or complex to include in your main loan papers. Before you sign your loan documents, you need to familiarize yourself with any riders you may have with your mortgage.
The length of a rider depends on what type of rider it is, but most riders are at least three pages long. You'll still have to sign and date the rider, but you usually won't have your signature on the rider notarized because it's already notarized on the main loan papers. Your main loan papers already include a statement above your notarized signature that says you're agreeing to the loan and any attached riders by signing the main loan document.
A mortgage rider may address special financial loan terms or the type of property the loan is covering. For example, a balloon rider is used if your loan has a large "balloon" principal payment due at the end of the term. Riders for adjustable or variable-rate mortgages explain how and when your loan's interest rate will change. If you're buying a property you can rent out, such as two-family home, you'll have a "1-4 family rider" on your loan. The rider explains that the lender can collect rents from the property to apply to your mortgage if you fall behind on payments. If you're buying a condominium unit, a condominium rider spells out the special terms of condominium ownership, such as how you must follow the condo association's rules.
You need to review the rider's terms just as you would the main loan paper's terms because you're just as bound to the terms in the rider as you are to the main loan terms. The rider gives the lender additional rights regarding your loan, and if you violate the rider's terms, you will have to deal with the consequences. The same holds true if you aren't aware of the rider's terms. For example, if you haven't looked at the variable rate rider for your loan, you may not know when your loan payment could change. If your loan has a prepayment penalty rider, you may have to pay a penalty to the lender if you pay off your loan early.
Some mortgages have multiple riders. For example, if you're buying a condominium with a variable-rate loan, you'll have a condominium rider and a variable-rate rider attached to your mortgage.
You may need to sign a rider if you're getting assistance with buying your home from a local housing authority or neighborhood nonprofit. The rider contains any special restrictions you're agreeing to in return for help. For example, if you must live in the home for a specific number of years in exchange for receiving grant money, you may have to sign a rider that indicates you agree to the terms.
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