Components of a Mortgage - Mortgage Basics

Jon's mortgage is comprised of different parts:
-The mortgage amount or amount borrowed from the bank
-The term or the length of time that a specific mortgage agreement covers - (Term) (Years).
-The interest the bank charges on your mortgage every year, (Interest Rate).
-The number of years it takes to pay off his mortgage (Amortization).
-How he pays for his mortgage (Payment Frequency).
-And if he would like to add special payment options to his mortgage (Payment Options).

Jon's mortgage amount, his interest rate, amortization, payment frequency and payment options all affect payment. Changing any of these will have a drastic effect on a mortgage's payment.

Term: The term of Jon's mortgage means that his mortgage is locked in with bank for a set amount of time. Jon can pay a penalty or a discharge fee to the bank to break his mortgage. The average mortgage term is 5 years but you can also get them for 6 months to 10 years.

When Jon's term matures or expires, the balance or the remaining amount of his mortgage is renegotiated for another term at rates and conditions in effect at that time.

Interest: Banks compete for Jon's business by offering him interest rates for your mortgage. In many cases, Jon will go with the bank or lender who gives you the best interest rate.

The interest rates that Jon sees are based on a specific term. The longer the term, the higher his interest rate. The shorter his term, the lower his interest rate would be.

Amortization: Amortization is the process by which Jon's mortgage decreases to zero. Amortization controls how much Jon pays the bank back in interest and principal per month.

The longer Jon's amortization is, or the longer it will takes him to pay off his mortgage, the longer the bank has to charge him interest on his mortgage. In other words, longer amortization means a higher interest cost over the term of jon's mortgage.

Payment Frequency: A bank will allow Jon to pay off his mortgage in different ways. Jon chooses to pay his mortgage every month. However, Depending on his financial situation and mortgage goals, Jon could have chosen a different payment frequency, such as paying every week, to help him pay down his mortgage faster.

Payment Options: Jon has also been given different options to pay off his mortgage sooner. choosing to pay over and above his regular mortgage payment means he can pay off his mortgage faster and, pay less in interest over the course of his term.

A mortgage can designed to your specific situation. A well tailored mortgage provides you with interest savings and can be paid off sooner. Ask me how!

Дата добавления: 2015-11-14