What are surety bonds? These are legal contracts between an obligor and a surety. This contract is called a surety bond because it provides security for the surety’s claim to recover from the party who lent money. In real estate finance, surety bonds involve a promise from one party to assume certain financial responsibility for a borrower should that borrower default on his or her mortgage payments.
Surety bonds are issued by banks, building societies and private companies that provide surety service for borrowers. The surety provides the lender with a written assurance of payment, usually on a promissory note, that he will repay the debt if and when requested. Banks issue surety bonds in order to secure long term relationships. They do this by requiring a co-signer to make a specific loan payment if the borrower fails to make his or her payments. They may also require the borrower to post a security as collateral and provide a signed promise to pay.
To understand surety bonds, you first need to understand the nature of mortgages. A mortgage is an agreement by which a lender promises to pay a particular amount of money to the borrower upon a specific date. If the borrower fails to make the mortgage payments, the lender can seize the borrower’s property, repossess the home and sell it at public auction. In other words, a mortgage is a guarantee that pays you back if you fail to make your payments. However, most people are familiar only with the idea of mortgage.
For surety bonds to be effective, they must ensure that the borrower will make his or her mortgage payments. In many states, the surety must also submit a certification of financial responsibility to verify that he or she will make all the mortgage payments. While this seems like a lot of work for the surety, it is actually required by law.
What are surety bonds? What types of bonds are there? There are many forms of surety bonds including, mortgage and car title bonds, commercial surety bonds, general surety bonds, personal surety bonds, business surety bonds and even tenant surety bonds. Each type has its own rules and procedures for obtaining a bond.
Mortgage bonds: These are secured by the borrower’s mortgage. These usually have longer and more detailed requirements than general and personal surety bonds, but they are often easier to obtain since the borrower doesn’t have to leave a co-signer. Car title bonds: These require that the person who co-signs the mortgage is also the surety.