A loan that is secured by property or real estate is called a mortgage. In exchange for funds received by the homebuyer to buy property or a home, a lender gets the promise of that buyer to pay back the funds within a certain time frame for a certain cost.
When you agree to a mortgage, you are signing a legal contract promising to repay the loan plus interest and other costs. Your home is collateral for that loan. If you do not repay the debt, the lender has the right to take back the property and sell it to cover the debt, a process known as foreclosure. Mortgage loans are based upon credit. Please review Fancy Chat’s, Credit 101 page for more information on obtaining good credit.
Different Mortgage Loans:
- Fixed Rate – 15 or 30 year term, with the same interest rate the duration of the term.
- Adjustable Rate (ARM) – Typically changes every year after the initial period of being fixed.
- Jumbo Loan – Exceeds conforming loan limits established by regulation (not common).
- FHA Loans – Loan program allows you to make a downpayment as low as 3.5% of purchase price.
- VA Loans – Loan program to military service members and families (Many Financial Institutions have great VA programs).
To gain more insight on the different mortgage loans, check out the Home Buying Institution.
If you currently have a mortgage, you have an option to save money. You also have an option to borrow more if needed, under special circumstances.
- You can refinance your remaining balance on your mortgage for a lower interest rate and a term you can afford. (The term is the number of years it will take to repay the loan).
- Cash-out refinancing, in which you take out a new mortgage for more than you owed.
When Re-Financing your mortgage you have the options of a Fixed or ARM Loan.