Jan
07

Mortgage Terms- Enlighten yourself on the Things you Need to Know

By
Flynna Sarah asked:




If you are a first timer in applying for a loan, there are various terms that you should learn.  Educating yourself to all these terms that you will hear in any real estate transactions, it will help make you a wiser decision maker.  As soon as you engage in mortgage contract, your house will become your collateral and it is your sole responsibility to secure your monthly dues.  To enlighten you with these basic mortgage terms, go over the rest of this article.

Basic Terms

Principal- this is the amount of money that you owe to your lender.  But you can not get the principal unless you have paid the down payment.  And the down payment is the rate that you will add to the principal.  The down payment will depend on the value of the house.  Once you paid off your monthly dues until the end of the contract, the house is completely yours. Interest- the rate will be included to the amount that you borrowed.  Apart from the interest, there are also factors that lenders might include in your payables.  This is a portion of the whole amount that is financed.  These two terms comprise the entire amount of the monthly dues, which is commonly known as amortization.  Primarily, this is the process wherein your loan is lessened over a given period of time.  The payments you made for the first few years will be credited to the interest, while payments made alter will be deducted from the principal amount.  Included in your mortgage payments can be credit to an escrow account and can become your insurance, taxes or other fees. Taxes-this is the amount that you have to pay to your state or local government.  The tax for your house is known as property tax.  And this is used to build schools, roads, and other public infrastructure.  Every homeowner is asked to pay his own property taxes. Insurance-this term is not only for real estate properties.  Cars and your other assets also need to have insurance.  You are not allowed to finish your mortgage if you do not have an insurance policy for your house.  Home insurance will handle all the damages due to floods, fire, theft and other possible calamities than can destroy your house.  It is advisable to pick a good insurance plan so you will not have some complications when you repair your house in the future.

One thing to keep in mind when the down payment you paid is lower than 20 percent of the whole value; you will have to pay for extra premiums intended for insurance by the lender.  This is made to protect you in case you can not settle your loans.  Once your payment accumulated up to 78% of the value, you can stop paying for the insurance premiums.

The terms mentioned above are very essential when you are planning to buy a house.  Enlightening yourself with these things will help you stay away from possible fraud or scams.  If you want to have a lower interest rate, it is best to apply for a fixed interest rate.  This will let you focus on your money on paying the principal as well as settle your loan balance faster.  The mortgage is very essential in any home buying procedure because this will reveal the answer if you can fulfill your dreams or not.  And if you chose a bad mortgage, it can result to the worst case—lose your home.



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