As soon as you want to buy a home or refinance your current HOME LOAN it is vital to know about how mortgages work, the various kinds of mortgages, how home loans are financed and how properties are appraised. The more you know about the home mortgage the more money you can save or even earn as you build equity in your home. To help you embark here are a few terms you should know about to get the best deal.
MORTGAGE: A mortgage is in essence a pledge to pay a debt put down on paper. That’s it. A mortgage is a contract to pay money that has been loaned to you with the home being security. Accordingly, if ever you should choose not to pay or are not able to come up with the money to pay for your mortgage for three months consecutively you can expect the lender to seize the home, this process is called FORECLOSURE.
TERM: The amount of time in which a mortgage is to be paid back is called the term. A few familiar terms are 30 years, 15 years and even 10 years. The length of the term shapes how much the monthly mortgage payments will be.
INTEREST RATE: The interest rate is the percentage paid on the principal amount. In short, it is the cost of the money you use. These can be high or low derived from the borrower’s CREDIT SCORE. The higher the credit scores the lower the interest rate and the lower the monthly mortgage loan payments. The lower the credit scores the higher the interest rate and the higher the monthly mortgage loan payments. In short, the better your credit score, the less you pay.
VARIABLE RATE MORTGAGE: A variable rate home mortgage loan is a home mortgage that changes from time to time. Variable Rate Mortgages are often fixed for a certain time often 1 to 5 years, and then they become variable. This can be good or bad thing reliant on your viewpoint.
FIXED RATE MORTGAGES: In a fixed rate mortgage the interest rate remains the same for the entire length of the mortgage. If your mortgage loan interest rate started at 5 irrespective of the market and how high the interest rates get you will on no account have to pay in excess of 5 on that loan.
REFINANCING: Refinancing is the method to amend the terms of a current mortgage deal. You can refinance to lower your interest cost and save money by going for a lower rate or you can refinance to alter the length of your mortgage loan making it either longer or shorter. Also, you may have accumulated home equity that you might want to CASH OUT that equity to use to make home improvements or other needs. In every case refinancing your mortgage involves new CLOSING COSTS, so just confirm that after the closing costs and fees are accounted for it is still worth the lowered interest rate or cash out. At times it isn’t.
EQUITY: In simple words equity is the difference between your mortgage loan balance and the value of the home. If you owe the bank $125,000 on your mortgage and your home is worth $215,000 you have $90,000 in equity on hand. If the home costs in your vicinity are rising while your loan amount is descending you are making equity.
APPRAISAL: This is crucial feature of your mortgage. The value of your home has to be established earlier than the lender can lend you money for it. An appraiser decides the amount the home is really worth by comparing it to homes in the vicinity and scrutinizing all of its aspects.
Mortgage loans don’t have to be daunting. Provided that you are well versed you should be able to deal with your home mortgage loan successfully. The more you know the better.
![[Valid RSS feed]](http://www.look4articles.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites
![[Valid RSS feed]](http://www.look4articles.com/images/rss.jpg "XML Feed For RSS")