Understanding The Basics Of A Mortgage

Understanding the​ Basics of​ a​ Mortgage
A mortgage is​ nothing but a​ loan secured against the​ property that is​ your home,​ here secured means if​ you​ are not prompt with your loan payments,​ the​ lender has the​ rights to​ sell you​ home to​ take back his amount he has lent to​ you​ .​
a​ mortgage is​ nothing but a​ piece of​ paper,​ but the​ paper is​ so important that any individual see during his financial life.
Anyone would prefer to​ go for a​ secured mortgage for the​ home and it​ is​ not so tough today as​ the​ mortgage is​ available for any kind of​ financial requirement,​ but choosing the​ right one is​ important and it​ deserves a​ little knowledge.
Its huge amount required for mortgage and to​ settle this huge amount you​ require long time .​
The most famous mortgage that is​ a​ fixed mortgage available with the​ option of​ repayment in​ 30 years,​ there are 40 years mortgage,​ 20 years mortgage and 15 years mortgage available and are famous too.
When you​ purchase a​ home,​ you​ need to​ reserve your money for insurance,​ taxes in​ an​ escrow account,​ so when you​ get the​ mortgage,​ your payment would be divided into 4 categories that is​ called PITI (Principal,​ Interest,​ Taxes and Insurance)
Principal is​ the​ loan amount balance and that gets paid during the​ years of​ mortgage you​ have chosen .​
Interest is​ the​ amount you​ pay for the​ loan amount,​ in​ amortized loans the​ entire repayment of​ loan amount goes for the​ interest in​ the​ early years and in​ the​ later years repayment goes for the​ principal loan amount .​
Taxes is​ something you​ owe annually to​ the​ government for water treatment,​ schools and to​ the​ cop on​ the​ corner and at​ this time the​ escrow account helps you​ to​ make the​ payment in​ monthly installments .​
Insurance is​ very important thing as​ you​ can’t imagine losing your home for any kind of​ disaster,​ and this insurance is​ being paid by escrow account in​ 12 installments.
Fixed rate mortgage are static,​ when you​ are planned to​ stay in​ the​ same place for a​ long time the​ fixed rate mortgage is​ the​ best as​ there would be no change in​ monthly payments for the​ loan amount you​ have gone for 15 years or​ 30 years of​ mortgage.
Incase you​ have no intention to​ stay in​ the​ same home for long years you​ can opt for Adjustable rate mortgage that is​ ARM .​
This adjustable rate mortgage has variable rate of​ interest and the​ payment varies annually or​ anytime whenever there is​ change in​ the​ interest rate .​
If the​ interest rate goes up your mortgage payment goes up.
Adjustable Rate Mortgages are being called as​ Interest rate risk unlike fixed rate mortgages where you​ are very confident about how much you​ are making the​ payment for the​ principal,​ interest,​ taxes and insurance every month through out your loan repayment years.

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