Mortgage Loans: A Brief Summary
by Karen Schweitzer
A mortgage loan is a temporary pledge of property to a creditor. By taking out a mortgage you are agreeing that you will pay back any money that you borrow from a creditor by a specific date. For security, creditors hold the title or rights to your property until the money has been paid back in full. If your mortgage loan is not repaid, you are considered to be in default and the creditor retains all rights to your property.
There are many different types of mortgage loans available, but all mortgage loans have two things in common. The first thing is the mortgage principle. A mortgage principle is the actual amount of money that you are borrowing. For example, if you take out a $90,000 mortgage, your mortgage principle is $90,000.
The second common feature is mortgage interest. Mortgage interest is the money that you in addition to your mortgage principle. When you pay interest, you are essentially paying a fee to borrow money.
It is very important to get a low interest rate when you take out a mortgage. As with any loan, the lower your interest rate, the lower your monthly payments will be. Rates are influenced by a variety of factors, including economical conditions, credit ratings, lending fees, and term length. The final deciding factor is the type of mortgage.
There are two types of mortgages: fixed rate mortgages and adjustable rate mortgages. A fixed rate will give you the security of knowing that your interest rate will never change throughout the term of your loan. An adjustable rate is the opposite. With an adjustable rate, the percent of interest you pay fluctuates throughout the term of your loan, increasing and decreasing.
Regardless of what type of mortgage you choose, it is important that you do as much research as possible prior to making a decision. A mortgage is a major responsibility and should never be taken lightly. By choosing the mortgage that is right for you in the beginning, you can save yourself unnecessary stress in the end.