Mortgages
are generally a tricky business, especially with the current states of the economu and the housing market. Many people dream of buying their own home, but few can actually pay for it entirely up front. This is where mortgaging comes in.
A mortgage is a special type of loan you obtain from a creditor to pay for a house. If you are unable to pay off the loan, then the creditor is entitled to the house in order to cover the missed payments. Mortgages can be risky, but many homeowners do not have any other choice if they want to own their home.
Mortgages are generally comprised of four things. First off is the loan principal. The principal is simply the original amount of the loan. So if you take out a $100,000 loan, then your principal is $100,000. Next there is the mortgage payment, which is the amount a homeowner pays every month in order to pay off their house on time.
Then the interest rate is the percentage of the total mortgage that the bank receives in exchange for providing you the loan. If your mortgage payment is less than the interest that the bank receives, then you will never pay off the mortgage and the amount you owe on the loan will exponentially increase.
The mortgage payment and the interest rate are not randomly determined. One of the biggest influences in determining these numbers is the term of the mortgage. The term is the amount of time a homeowner is allowed to pay off their mortgage. A typical term lasts between fifteen and thirty years.
Mortgaging and home ownership is a complicated process but it is easier to endure once you know the basics.
