Friday, October 30, 2020
Home Real Estate A Basic Guide to Mortgages

A Basic Guide to Mortgages


Mortgage is the term use to refer to the loan that one has made in order to buy real estate, usually a house. The mortgage serves as a legal claim or a lien on a property as a security that the borrower would pay the debt. In other words, the house is the collateral to the loan. If the borrower fails to make payments, the lender is within his right to take away the property. Monthly payments are usually required to repay the loan with interest, taxes, and insurance included. The loan payments could last until 15 to 30 years, depending on the contract.


The terms you would usually encounter when talking about mortgages are the principal, interest, taxes, and insurance. The principal is the original sum of money that is loaned. Interest rates are the charges that the lender assigns for the use of his money. The lender could charge additional loan costs and points. The taxes in mortgages refer to the community property taxes based on the value of the house or property. Unless the house has insurance, lenders would not agree to close a transaction with the borrower. However, for others turned down by lenders, institutions like SpearMortgage can still help them pursue their real estate purchase.


Factors that affect the amount of mortgage payment include: the mortgage interest rate, cost of mortgage insurance, size of down payment, repayment term, amount of property taxes, and amount of annual homeowners insurance premiums. The homeowner or borrower would be paying the mortgage through monthly payments of principal and interest gradually. The payments are planned so that at the end of a fixed period of time, the house would be fully owned by the owner and be debt-free. Usually, during the first few years, the homeowner would be paying for the interest. It is during the final years that the payments are made to clear off the principal. This is referred to as amortization. If, however, the homeowner sells the house before the loan is paid off, he would still be required to pay back what remains of the principal balance due on the mortgage loan.


There are several types of mortgages. Fixed rate mortgages offer an interest rate that remains fixed over the duration of the loan. In adjustable rate mortgages, the interest rate changes over time. It is an advantage if the interest rates go down because it means that you would be paying a low interest rate too. Also, there would be reduction of initial payments if there are low start rates.


In a balloon mortgage, the principal and interest payments remain the same for the term of a balloon mortgage, usually about 5-7 years. Amortization of the principal and interest rates, however, is over 30 years. The good thing about this is that one could reapply for refinance after the mortgage has been paid off. The home loan repayment relief mortgage offers a three-year adjustable rate at one percent below the national rate for the same type of loan. Three years after, the rate is adjusted yearly to follow market rates. The homeowner could save money because of the affordable rate and enjoy full ownership of his property sooner.



Logan A
Logan A
I have always enjoyed writing and journaling and I am very pleased to be part of Urban Splatter's team!

Leave a Reply

Must Read

Best Watches For Engineers

  Engineer’s contribution to society brings us convenience in our lives. Because of the skillful engineers, all kinds of technical problems can be solved, and...

7 Deck Upgrades You Never Thought You Needed

Regardless of the size and look, a deck is meant to be a place of relaxation; a piece of paradise, so to speak. It...

Looking For Boise ID AC Repair Service? Here’s How To Find Them

Is your air conditioner refusing to blow cool air? Is it perhaps leaking water inside your house? Experiencing such scenarios during summer is the...

Creating a Low Maintenance Garden For Your Home

Gardens, they are our personal slice of green haven in a busy world. Somewhere we can rest, relax, enjoy time with friends and family...

Top 4 Best Garage Floor Coating Options

Interior floors use carpets, rugs, painting, and various coating products to enhance the look and its anti-slip property. Exterior floors and those located in...


Most Popular

Top 50 Most Dangerous Cities in the United States

Which American Cities Rank as the Most Dangerous? The United States has always had crime in not only urban areas, but also some rural towns....

4 Best Architecture TV Shows to Watch When You’re Bored

Best Architecture TV Shows Architecture is integrated within more channels than you might think. If you are interested in any sort of architectural design, then...

Mark Cuban’s Texas House

Its a Deal, Mark Cuban's House is a Mansion If you have watched Shark Tank then you are familiar with Mark Cuban. He is a...

Keep Reading