Understanding Mortgage Basics
Being able to buy that house you have always wanted probably means that you will need to get a mortgage. Another word for a mortgage is loan – which you usually get from a bank or other lending agency. Since most people are not able to buy their house with cash, a loan is the most common practice. Here are some things to help you understand mortgage basics.
Length Of The Mortgage
The size of a mortgage makes the length necessarily longer. Common lengths of mortgages can fall anywhere between ten and thirty years. This means, that if you pay according to the terms of the mortgage, that you will have it entirely paid off at the end of that time. Generally, the lower amount of payment you can afford, the longer the time you will need to pay off the mortgage.
Interest On A Mortgage
The interest rates on buying a house or property change every day – sometimes even more than once a day. It depends on the economy, and the area you live in. You need to shop around and get the lowest amount of interest that you can because even one percent over 30 years means a difference of over tens of thousands of dollars.
Two Types Of Mortgages
All mortgages will fall into one of two types. It will be either a fixed rate mortgage, or an adjustable rate mortgage. The fixed rate mortgage is one where the interest and payment amounts are “fixed.” That means it is always the same until the mortgage is paid in full. The other, an adjustable rate mortgage, is, like the name implies – adjustable. That means that the amount of your payments changes in an unpredictable way – according to the economy. If the economy is doing well, then your interest rates on the mortgage are lower – and so are your payments. But remember, it may cover a thirty-year period. No one can see that far ahead. A bad economy also means that your payments can become very high – maybe even too high. These are excellent when the economy is doing well, but you may need to get another mortgage if the economy goes bad.
Paying Off The Mortgage
The best type of mortgage will enable you to increase your payments, or make additional payments in order to reduce the amount you owe. This means that you will be able to pay off the mortgage early, and save a lot of money. Most mortgages, however, have clauses in them that will limit how much you can pay extra each year, or may not allow it at all. You may need to negotiate with the lender in order to get this put in the agreement.
When going for your mortgage, the best thing you can do to help yourself is to understand as much as possible about mortgages. Then, with that knowledge, shop around and get online quotes so you can compare various offers in order to get the best deal.