Everything You Need To Know About Mortgages
No doubt you have heard the word ‘mortgage’ many times. Mortgages can be referred to by many names. Mortgages can also be called home loans, and some people refer to them as liens. It does not matter what term it is known by, there is one simple definition of a mortgage.
The Definition Of A MortgageA mortgage is simply an amount of money that a borrower owns on a piece of property. The mortgage acts as an agreement between a lender and a borrower, and the lender loans the borrower a certain amount of money in exchange for property.
The bank or lender will loan the borrower the money, but certain stipulations must be met. The borrower must pay the money back in a certain amount of years at a certain interest rate. If you qualify for the loan, you will enter into a contract with the lender and you will make payments on the mortgage until you have repaid the loan in full. The property that you obtain through the mortgage is also the collateral for the mortgage. This means that if you fail to keep your end of the agreement by defaulting on the loan, the lender has the right to seize the property and resell in order to recoup their losses. When you lose your home through the default, the process is known as foreclosure. |
The Different Types Of Mortgage Transactions
There are four different types of mortgage transactions. These transactions are:
- Home Equity Line Of Credit
- Cash Out Refinance
- Rate and Term Refinance
- Purchase Money Mortgage
The Terms Of A Mortgage
Most mortgages have 30 year terms. This term determines how long the borrower has to pay the home off. The term for a 30 year mortgage is also based on 30 year amortization.
Amortization details how the mortgage will be paid off. Mortgage payments are distributed in different ways. Part of the mortgage payment goes toward the payment and the other part goes toward the interest.
There are also other mortgage terms that you can select. Although less common, terms are available in 15, 20 and even 50 year programs.
Amortization details how the mortgage will be paid off. Mortgage payments are distributed in different ways. Part of the mortgage payment goes toward the payment and the other part goes toward the interest.
There are also other mortgage terms that you can select. Although less common, terms are available in 15, 20 and even 50 year programs.
Different Mortgage Options
When applying for a loan, you will be presented with several different products. You can choose from a six month product all the way up to a 30 year fixed product. These products are both based on 30 year amortization, but the rates are very different.
Mortgages can be complicated to understand. This is why potential borrowers should research the industry and become self-educated so they can choose the best mortgage for their needs.
Mortgages can be complicated to understand. This is why potential borrowers should research the industry and become self-educated so they can choose the best mortgage for their needs.