Mortgage 101

Owning a house is a key moment that anyone will cherish for the rest of their lives. Owning property is a wise decision because it will add equity to your name, along with potentially appreciating in value over time if you wish to sell. Houses are obviously expensive and paying the full price for a house upfront is not always realistic. A great alternative is a mortgage, which is a loan used to finance the purchase of a house or property over time.

The mortgage business and real estate have some tricky terms that will be important to know when becoming a home owner. For example, interest and interest rates are vital to understand when buying a house. Interest is the cost of borrowing from a lender. Interest rates often fluctuate depending on the state of the market. Another term that might be thrown around when buying a house is principal. Principal is the amount the borrow of a loan owes the lender. The principal value will decrease over time as you make more payments. Loan term determines the lifetime of your mortgage and how long you will be paying off the house. There are multiple lengths of loan terms but usually when talking about mortgages 15 yer and 30 year mortgages are common. Down payment is something that may determine the length of your loan term. Down payment is the payment that has been made at the beginning of a house purchase. 

When talking about loans it is important to understand which type of loan is best for you. The two main types of loans are fixed rate mortgage and adjustable rate mortgages. Fixed rate mortgages are the most common mortgage, they are monthly payments on a house with interest rates that stay the same for the remainder of the mortgage lifespan. This means that if interest rates rise or decrease, the fixed rate mortgage payment will stay constant. This is a huge benefit because your mortgage will stay constant no matter how the market performs. A negative for this type of mortgage is if you bought the house with high interest rates, your interest on the house will stay at the same high level no matter what. Adjustable rate mortgages are loan payments that start with lower interest rates and monthly payments and eventually adjust periodically. This adjustment affects your interest rate. How often your loan adjusts is based on the lender as it can vary. A benefit of this loan is the ability to get a lower payment and interest rate, especially if the current market had unfavorably high interest rates. A downside to this type of mortgage is that your interest rate on the mortgage may go up overtime depending on the current state of interest rates.

Sources:

https://www.greenpath.com/blog/housing/mortgage-and-interest/?auto&utm_medium=ppc&utm_source=adwords&utm_campaign=&utm_term=mortgage%20101&hsa_acc=6209487131&hsa_ver=3&hsa_mt=b&hsa_src=g&hsa_kw=mortgage%20101&hsa_net=adwords&hsa_ad=665669548747&hsa_cam=20363790687&hsa_tgt=kwd-25429742&hsa_grp=154982327487&gclid=Cj0KCQjw-pyqBhDmARIsAKd9XIOwe4JEgXfcUL1EpMxF4a34Gy6OMnTxp9l5JiCCNRQ-JbUM_aZmRBcaAn0LEALw_wcB

https://www.moneyunder30.com/beginners-guide-to-mortgage-loans/

https://www.investopedia.com/terms/m/mortgage.asp

https://www.consumerfinance.gov/consumer-tools/mortgages/answers/how-to-guides/