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Difference between revisions of "Mortgages and Financing a Home Purchase"
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Mortgages and Financing a Home Purchase (view source)
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==What is a mortgage?== | ==What is a mortgage?== | ||
A mortgage is a type of loan, often used as a way of buying a house, where the lender provides part of the purchase price (often most of it) in exchange for the guarantee of repayment plus interest. The mortgage agreement is a contract that both you and the lender must comply with. When you get a mortgage to buy a house, you borrow money from a lender (often a bank) and promise to pay back that money, usually with interest and in regular payments. The lender makes sure you’ll repay the loan with a “charge” against your house. That charge means that if you don’t make your mortgage payments, the lender can take the property or sue you for what you owe. | A mortgage is a type of loan, often used as a way of buying a house, where the lender provides part of the purchase price (often most of it) in exchange for the guarantee of repayment plus interest. The mortgage agreement is a contract that both you and the lender must comply with. When you get a mortgage to buy a house, you borrow money from a lender (often a bank) and promise to pay back that money, usually with interest and in regular payments. The lender makes sure you’ll repay the loan with a “charge” against your house. That charge means that if you don’t make your mortgage payments, the lender can take the property or sue you for what you owe. | ||
If your equity in the house is not more than what you owe, the lender may take the property. Equity is the amount that your house value exceeds your mortgage loan and any other debts, judgments, or liens registered against your house. This legal action is called foreclosure, and you can learn more about it in script [[Foreclosure (Script 415)|415]], called “Foreclosure”. Another way to finance a house purchase, called an agreement for sale, is described near the end of this script. | If your equity in the house is not more than what you owe, the lender may take the property. Equity is the amount that your house value exceeds your mortgage loan and any other debts, judgments, or liens registered against your house. This legal action is called foreclosure, and you can learn more about it in script [[Foreclosure (Script 415)|415]], called “Foreclosure”. Another way to finance a house purchase, called an agreement for sale, is described near the end of this script. | ||
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==What is the term of the mortgage?== | ==What is the term of the mortgage?== | ||
The term is the time the mortgage lasts. Because interest rates are always changing, most lenders won’t lend their money at the same interest rate for as long as the usual amortization period. Instead, lenders first calculate the regular payments as if they were lending the money for the full amortization period at the same interest rate. However, then they lend you the money for a shorter time, or term. You can usually choose terms between 6 months and 10 years. Longer terms often have higher interest rates. At the end of the term, you have | The term is the time the mortgage lasts. Because interest rates are always changing, most lenders won’t lend their money at the same interest rate for as long as the usual amortization period. Instead, lenders first calculate the regular payments as if they were lending the money for the full amortization period at the same interest rate. However, then they lend you the money for a shorter time, or term. You can usually choose terms between 6 months and 10 years. Longer terms often have higher interest rates. At the end of the term, you have to pay the remaining amount of the mortgage to the lender. If there are no problems, you can normally do this by just renewing your mortgage for another term, at the current interest rate. | ||
==What if you want to pay your mortgage off quickly, before the term ends?== | ==What if you want to pay your mortgage off quickly, before the term ends?== | ||
