Buying a home is a big step, and understanding mortgages is key to making that dream a reality. At its core, a mortgage is a loan that helps you finance your home, with the property itself acting as collateral. Knowing the basics can make the process less overwhelming and help you choose the right loan to fit your needs.

>>> Mortgage <<<

A mortgage loan is a loan from a lender (banks, credit unions, ect), secured by real estate. Homeowners pay back the money borrowed over a set period of time, plus interest.

>>> Down Payment <<<

A down payment is the amount of money you put towards the price of your home.

>>> Amortization <<<

Amortization is how long it will take to pay your mortgage in full. Term refers to the length of a mortgage contract provided by a lender.

Shorter Amortization:

· Less time to pay off your mortgage

· Less interest paid overall

· Higher mortgage payments

Longer Amortization:

· More time to pay off your mortgage

· More interest paid overall

· Lower mortgage payments

>>> Mortgage Term <<<

The mortgage term is the length of time you're committed to your mortgage interest rate, lender, and associated conditions. At most lenders, mortgage terms range from six months to 10 years, with five years being the most common option. Once your term is up, you may be able to renew your mortgage loan with a new term and rate or pay off the remaining balance.

>>> Fixed or Variable Interest Rates <<<

Fixed Rate mortgage: Your interest rate and mortgage payments remain the same throughout the term. You’ll know exactly how much you’ll still owe at the end of every term.

Variable Rate Mortgage: Your interest rate changes with lender’s prime rate while your mortgage payments remain the same throughout the term.

Got questions? Reach out to Angie Li at TMG – she’s here to help!