The Word Is: Mortgage

Category: Finance.

Many first time home buyers have heard this word, but simply dont really know anything about it.

As a first time buyer, you really need to understand what a mortgage is before you can even attempt to buy a home. The word is: mortgage. Far too many people lose their homes because they really dont understand what a mortgage is. Being ready and mature enough to handle a mortgage is a big deal and one that should not be taken lightly. Being too young, or too irresponsible, too immature can wreck havoc on your financial future if you try to take out a mortgage. Thus, it is vital to understand the elements of a mortgage before getting one for yourself.

Sounds simple right Well it actually could not be any simpler than that. A mortgage is composed of three basic parts, the interest, the sum, and the term. Let us dive a little deeper to see what each of these actually mean for you the buyer. This number can range greatly depending on the amount that you require. The sum of the loan is how much it is worth. It is important not to go too high over the amount you will need for the home.

A mortgage is like any other loan you must make a monthly payment on the interest. Many mortgage brokers will help you determine the size that is needed in order for you to purchase the home without going too far over your budget. This amount will be different depending on the lender you choose to go through. If you do not make this monthly payment on time, it could result in loosing your home. Be sure to shop around with different lenders to find out which offers the lowest interest rates to insure proper payment. Every mortgage has an allotted amount of time in which you are to pay back the loan. Typically loans are offered in two terms, 15- year and 30- year terms.

This amount of time is referred to as a term. If you choose a 30- year term, your monthly payments will be lower because you are paying the loan off over a longer period of time. It would seem that picking a 30- year term would be popular because you wouldnt have to pay that much monthly. A 15- year term would mean that you are making higher payments. While you are paying lower rates each month, you will be paying more interest throughout the life of the loan. The most important tool to understanding how a mortgage will affect you is to have a good mortgage broker who is willing to explain things to you.

The 15- year term will be a little easier in the long run because you are paying the interest and not building up any principal. Let them know whenever you have questions and never be afraid to ask anything that may seem simple. Aside from money issues, many people lose their homes due to the fact that they did not understand the mortgage and they never asked any questions to their mortgage broker.

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