Mortgage is one of the top things you will encounter when buying a new home. Understand the processes of mortgage in order to avoid the stumbling blocks and challenges of acquiring a new property.
There is overwhelming paperwork that you need to comply with and oftentimes may leave you discouraged to take on this lucrative investment. An initial understanding of mortgages.
An initial understanding of mortgages that help you makes solid and informed decisions regarding your home purchase. Call a mortgage specialist for details!.
3 Top Facts about Mortgages
The simple definition of mortgage is that it is a form of loan used in order to finance a home purchase. It is also possibly the largest debt you will ever incur in your life. There are several parts of mortgages that all home buyers need to learn and understand.
The collateral refers to an agreed upon attachment to the loan or mortgage in case you default on the contract. Agreeing to a mortgage requires home buyers to sign a legal contract that indicates repayment of the loan. This includes the interest and other additional costs. In home purchase, the home is considered the collateral for the incurred loan. The lender takes back the property in case you don’t repay your mortgage.
2. Principal Interest
The sum of money that the home buyer borrowed for the purchase is considered the principal. A down payment lowers down the purchase price of the home thus reducing the principal amount as well. In most mortgage agreements, the lender requires home buyers to make down payment that amounts to 20% of the total home value or purchase price. The lender charges the borrower for the use of their money and this is known as the interest. Amortization is a process which includes principal and interest as the components of your monthly payments.
Mortgage payment also includes taxes, particularly property taxes. Property tax is what the community levies in accordance to the percentage of the total property value. You pay the taxes that will be used in financing the costs of daily operations in the community. For instance, property taxes are used for building and maintenance of roads, schools, infrastructures, and other public services.
Mortgages usually imply lengthy and complicated processes especially for first time home buyers. The best way to have a lucrative and hassle-free property investment is to know the fundamentals of home buying which include mortgage processes. Call a mortgage specialist for details!