Mortgage 101: Get To Know The Basics
It’s time to put the apartment renting to the side and divest your time and money into owning a home. You’ve gone to the open houses, looked at available properties, and found the perfect home you would love to spend your life in.
But you don’t have the money to pay for the house. This isn’t much of a surprise. Very few people have that much cash in the bank to purchase a home outright. But this doesn’t mean that your homeowner dreams are dashed. It simply means that you will have to apply for a mortgage.
A mortgage is a type of debt instrument offered to home-buyers through mortgage brokers and other financial lenders. Basically, it is a loan that you are agreeing to as you put your home up for collateral to the bank. The bank gives you the money to purchase the home, as you agree to repay the loan amount for a certain term at a specific rate. You make monthly payments until you have paid off the home. You can also refinance your mortgage loan to receive certain benefits.
Types Of Mortgages
There are many different mortgage types to choose from based on your financial situation and if you qualify to receive a mortgage. The most common types of mortgages include:
Fixed Rate Mortgage
Fixed rate mortgages are when your interest rate and monthly payments stay the same for the entire term of the loan contract. This is the most popular type of mortgage loan available.
Adjustable Rate Mortgage
Adjustable rate mortgages usually offer a certain period of time where the interest rate is fixed. After this time period ends, the interest rate is adjusted for the remainder of the loan.
For an interest-only mortgage, you only repay the interest rate for a certain period of time and delay making principal payments only until the interest-only term period ends.
If you have been faithfully making your loan payments and have a good credit rating, you may be able to refinance your loan. Now is the perfect time to refinance, as lenders are offering the lowest interest rates in history. Most people seek to refinance their loan to lower their interest rates or monthly payments. You may also refinance your loan to be placed on a fixed rate mortgage or to borrow money against the equity of the home so you can pay for certain expenses.
Always Pay Your Mortgage
If you do not make monthly payments, the bank has the option to foreclose on the home. This means the bank is taking the house as collateral to repay your debt to them, as the bank has the option to resell the house to another person to recoup their losses.
If you’re shopping for a mortgage and want to learn more about the right type is right for you and your family, visit http://AndrewWBradley.ca or call 613.286.6841.