First time home buyers! -Three important mortgage terms

Mortgage terms can get confusing for people who are applying for a mortgage.Documents to read and sign, and procedures to followed are apart of the mortgage process.  You’d think you were applying to go to Harvard or Yale, except they don’t require that much paperwork for you to be admitted!  Although getting a mortgage can be a confusing process, there are three terms that every mortgage holder should know to better understand what he is she is getting into. 

Knowing what you are getting into by understand some of the simple mortgage facts will help you immensely.

The first word you should know is, oddly, the word “term”.  Term refers to the length of the mortgage you are taking out – or the amount of time you are making payments. 

The most common choices for borrowers are 30 years-fixed and 15 years-fixed.Get lower monthly payments by obtaining a longer mortgage, which results in the mortgage lender making more interest.  Generally speaking, you should go for the shortest term you can comfortable afford – you’ll save potentially tens of thousands (and in some cases potentially over a hundred thousand) dollars in interest by keeping the length of the mortgage as short as you can.

Next, know how the interest rate on the mortgage loan is calculated.  The interest rate refers to the amount of interest charges you will pay for the money you are borrowing, expressed as a decimal – such as 5.2 for 5.2%.  Is it fixed or adjustable?  In other words, is it the same through the life of the loan or does it change at specified periods in time?Initially the adjustable rate mortgages look attractive, but you should stay clear of them.  They can often reset to higher interest rates and come back to bite you if you aren’t ready for a jump in your monthly payments!

Finally, understand what closing costs are and how they are going to affect your purchase price.  Often times, you are going to be responsible for coming up with these closing costs out of your own pocket.  Closing costs consists of things such as appraisals done on the house, attorney fees, notary fee, deed fee – if there is a fee they can think of it usually falls under the term closing costs!  Be a smart and savvy consumer, if you see a fee that you don’t understand or doesn’t seem right – speak up!Some loan officers try to get away with charging extra fees to make a few more dollars in profit.

The home buyer will make a better mortgage decision and get the right mortgage by knowing these three terms.Like with other services, it is necessary to get more than one quote for a mortgage loan for your home purchase.  Even a small change in the interest rate between two lenders can often to amount to thousands of dollars in savings.Make sure to check around-it’s is you dough after all!

This article was supported by Irvine home loans and the team at toronto condo for sale

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