( What is "Mortgage" ?? )

A mortgage is a debt instrument secured by a guarantee of specific real estate property, provided that the borrower undertakes to make a predetermined payment. Pawnshops are used by individuals and companies to make large real estate purchases without paying the full value of the purchase in advance. Over a period of many years, the borrower pays the loan, in addition to the interest, until he / she eventually has the free and clear property. Mortgages are also known as "liens against property" or "claims on property". If the borrower stops paying the mortgage, the bank can book.

Breaking the "mortgage"

In a residential mortgage, home buyers pledge their home to the bank. The bank has a claim on the home if the buyer defaults on paying the mortgage. In case of foreclosure, the bank may evict tenants at home and sell the house, using the income from the sale to clear the mortgage debt.

Mortgages come in many forms. With a fixed rate mortgage, the borrower pays the same interest rate throughout the duration of the loan. Monthly payment and monthly interest payments have not changed from first mortgage payment to another. Most fixed interest mortgages have a duration of 15 or 30 years. If market interest rates rose, the borrower's payment does not change. If market interest rates fall significantly, the borrower may be able to secure this lower rate through refinancing the mortgage. The fixed-rate mortgage is also called the "traditional" mortgage.

With an adjustable rate mortgage (ARM), the interest rate is fixed for an initial period, but then fluctuates with market interest rates. The initial interest rate is often lower than the market price, which can make the mortgage seem more affordable than it actually is. If interest rates increase later, the borrower may not be able to afford higher monthly payments. Interest rates can also go down, making ARM less expensive. In both cases, monthly payments after the initial term can not be predicted.

Other less common types of mortgages, such as interest-only mortgages, and payment option weapons, are best used by sophisticated borrowers. Many homeowners have encountered a financial problem with these types of mortgages during the housing bubble years.

When shopping for a mortgage, it is useful to use a mortgage calculator, because these tools can give you an idea of ​​the interest rates on the mortgage you are considering. Mortgage calculators can also help you calculate the total cost of interest over a lifetime mortgage.