Mortgage - The Basics of Mortgages

Piecing together which mortgage is right for you ultimately will require a mortgage specialist. Once you decide to move forward, I can provide a list of specialists for you to choose from. You can elect to work with one of these specialists or choose your own, it is up to you.

The following is a brief informative explanation of various mortgage types and terms.

Home mortgages can have a primary mortgage and a secondary mortgage. These are called First’s and Second Mortgages. And these relate to the priority on the title for a home in the event of default on making payments.

What we will be talking about mostly will be the First Mortgage or the principle. Home loads are structured to pay a combination of principal and interest each month.

The principle or balance amount that you currently owe and paid monthly and reduces this balance each month. So, over time the principle is reduced until there is a zero balance. This is normally structured to be paid off over a 30-year span. However, different durations and faster payments can reduce the overall length of a mortgage.

The interest is the remaining portion of your payment. The interest is based upon the yearly rate and then applied to the outstanding balance. The combination of principle and interest are structured to keep a fairly level monthly payment. So, over time your payments on your principle increases and payment toward interest decrease.

Home loans come in a variety of lengths like 10, 15, or 30 years. Normally, the shorter the loan period, the larger your monthly payment will be … And the greater the amount that goes toward paying down the principal each month.


Own Your Home Faster - turn a 30 year into a 15 year

There are several ways to own your home faster. Each one affects the principal balance.

Make two payments per month – but for half the amount. So if your mortgage payment is $2000, then make one payment on the 15 th and the other on the 30 th. Check with your mortgage company before you begin doing this to ensure that there are no prepayment penalties and that this will be applied correctly. By applying this method to a typical 30-year term, you will own your home in 21 years and not 30.

Make extra payments per month. This directly affects your principle and if done consistently will turn a 30 year term into a 15 year term with as little as an extra $100 per month.

One time during the year, when you have extra money, make an extra full mortgage payment. This can turn a 30-year term into a 12-year term.

In all cases, check with your mortgage company for restrictions, and to ensure the method you have chosen will work with the type of loan that you have.