For those own a house and buy using housing loan must heard about mortgage. But do you really understand about the mortgage terms ? It is important to understand about mortgage because it is related to our finance and much money will go to the mortgage.
WHAT IS MORTGAGE
In simple definition, mortgage is a loan to finance the purchase of your home.
In finance term, Mortgage is the transfer of an interest in property to a lender. It is used as a security for a debt that the money will be repaid from to lender. A mortgage is the serious financial obligation decision to make. You also can give the lender a sum of cash called a down payment to reduce the amount of money that will be financed.
WHAT YOU NEED TO KNOW ABOUT MORTGAGE
There’s term you need to know about mortgage. In this point I’ll give you the 4 term that you need to know such as :-
1. Principal – The principal is simply the sum of money you borrowed to buy your home. Before the principal is financed you can give the lender a sum of cash called a down payment to reduce the amount of money that will be financed.
2. Interest – Interest rate is what the lender charges you to use the money you borrowed. The lender could also charge you points and additional loan costs.
Principal and interest comprise the bulk of your monthly payments in a process called amortization which reduces your debt over a fixed period of time. With amortization, your monthly payments are largely interest during the early years and principal later.
3. Taxes – There’s a property taxes levies based on a percentage of the value of your home. It depend on your government regulation.
4. Insurance – Lenders will make sure you have insurance to covers from personal property against losses from fire, theft, bad weather and other causes. In my country there’s also insurance covered if the lender die known as MRTA.
Source :- Realtor
There are many types of mortgage. It depend on your country bank regulation but there’s basically two types of mortgages ; the fixed rate and the adjustable-rate mortgage (ARM).
Okay, that’s some basic information about mortgage. I can’t write much because there’s a different in other’s country. If you have any idea about mortgage, you could share with us.