What You Need To Know About Mortgage Types Before Applying For A Loan A mortgage…
Getting a new home? You would probably need a mortgage. A mortgage is a home loan that you take for buying a new home. It would probably be the biggest loan that you ever take in your entire life. Mortgage is the transfer of interest in property. While you cannot call a mortgage your debt, it is basically a security for your debt. This interest is set up on the condition that it would be returned to the owner once the mortgage has been satisfied or fulfilled whatever the case. It is the standard and the most used method to get your own real estate without needing to pay its full value immediately from their own resources.
Mortgages are of two types; legal and equitable. Your home is collateral for your mortgage which also happens to be a legal binding contract that you sign saying that you will pay back the loan along with the interest and other costs within usually say 15 to 30 years. You usually pay back the loan in monthly installments. If somehow you cannot pay back the loan then the lender has the rights to take over your home and sell it to cover the debt costs. The monthly installments that you pay usually consist of four things; principle, interest, taxes and insurance collectively known as PITI.
The principle is quite simply the sum of money that you took to finance your home. You pay part of that money back to the lender each month. Before getting the loan you can pay the lender an amount of money called the down payment to reduce your total principle.
Interest is the money that the lender charges you for using the money that you borrowed and it is usually expressed as a percentage of the total principle, called the interest rate. You can also be charged points along with the usual interest rate. Each point is one percent and can be financed along with your principle. Principle and interest form the bulk of your monthly installments with interest covering up the most part in the early years and principle in the later.
Your each monthly payment also may include some insurance or other such additional expenses which you would have to pay through an escrow account. If your down payment is less 20 percent the lender might consider your loan to be riskier and would open up an escrow account to receive these additional expenses such as insurance which are included in your monthly payment.
Taxes are the property taxes that your community charges you. These are used to develop your community such as construction of schools, roads, community centers and other infrastructure and other needs. You must pay these taxes regularly even if you do not need an escrow account or even when your mortgage has finished.
Getting your first mortgage may be a bit intimidating but most lenders will be very willing to help you through the process. Owing your own home is a great accomplishment in life so take heart and press on. And don’t worry, there’s a mortgage loan for everyone, no matter your credit history.