The mortgage loan world can be complex, particularly for people who haven’t navigated it before. At Mortgage Ogden, our mortgage brokers are here to help keep you from drowning in new information and details to keep track of.
One area that can go a long way here? Having a basic knowledge of some of the most commonly used mortgage terms. Here are a few of the most regular terms you’ll run into, in alphabetical order.
Appraisal is a process generally carried out by an independent third party, and it will tell you how much the home in question is worth. You may have an appraisal done while you investigate purchasing a given home, or you may have your current home appraised if you’re looking to sell or refinance a mortgage.
This is a yearly rate of interest that’s applied to your mortgage, and is short for Annual Percentage Rate. Don’t make the mistake of assuming this is a monthly rate.
At the end of the loan term, certain loans have a balloon payment that represents the final chunk of the principal amount, plus any interest remaining.
All loans have some form of collateral, or property that the lender collects if you default on the loan. In a mortgage, the collateral is the home.
Many lenders require an up-front down payment of between 10 and 20 percent of the total home’s value.
A foreclosure is a big black mark on your record, one where a bank takes possession of your home and forces you to move out after you stop paying a mortgage. Foreclosure is extremely damaging to credit.
Principal refers to the original amount borrowed, while interest is collected on top of that.
If you are unable to come up with the requisite down payment amount, some lenders will require private mortgage insurance from the borrower to protect them against risk.
When a home is sold for less than the total still owed on the mortgage. You may have to pay the difference, or that may be worked into the sale arrangement.
The length of the loan – most will range between 10 and 30 years.
For more information on simple loan terms or for any of our other services, speak to the mortgage brokers at Mortgage Ogden today.