A home purchase may be the single largest financial transaction you’ll have. The more you know about the process, the better equipped you’ll be to make big decisions that will affect you for years to come. You might have heard of these mortgage terms before but perhaps you haven’t purchased a home yet or simply need a refresher.
What is a mortgage?
When should I get a mortgage?
How mortgages work?
Borrowers choose a mortgage that works best for them based on a couple key factors: the length of the loan or term, the amount they can or want to borrow, and monthly payment amount. At the beginning of the loan term, interest will make up a larger percentage of the monthly payment amount. Over time, that percentage will decrease and you’ll begin paying more towards the loan principle until it’s paid off.
Lenders can provide an amortization schedule to show exactly how much each monthly payment is going towards principle and how much is going towards interest. An amortization schedule can also tell you how much you’ll pay in interest over the life of the loan. Sometimes borrowers want to pay off their mortgage faster than the term requires. Extra payments or large one-time payments can be made to accomplish this goal.