Mortgages have been a tried-and-tested method to help people get their dream home, enter the housing market, and buy and sell properties for a living. It’s a complex but very well-established network of legal, financial, and economic systems that have multiple levels, depending on whether or not you’re a buyer, seller, or even the middleman.
Knowing the ins and outs of this industry can have many benefits. In Utah, mortgage rates are generally more favorable to those who have a basic understanding of the terms and conditions, since they can negotiate a much better deal in terms of repayments. While it can take a while for people to get used to their payment terms, there are some basics that they absolutely must know before getting any kind of mortgage loan.
Some basic terms
If you’re getting a mortgage loan, there are four terms that you must be familiar with. You’ll encounter them all through the period of the loan:
● Interest: the extra amount charged when you borrow money for the loan. While you’ll most likely agree on a fixed amount charged annually with your lender, this can and will change depending on several factors like refinancing.
● Term: how long do you have to pay off the loan. Some loans will vary depending on risk and how good your credit score is. This can change: it’s possible to ask for an extension or change the terms depending on your repayment history.
● Frequency: refers to how much you pay and how often you do it. This amount can also increase and decrease at the lender’s discretion.
● Prepayment: some loans have other fees tacked on before you can get the entire amount, or require some sort of proof of collateral before you get your loan amount.
These terms should be very familiar to you by the time you’ve gotten your loan, since depending on your activity, credit history, the performance and value of your property, and especially how well your repayment schedule goes, you have the option of changing these factors in your favor.
Basic Types of Amortized Mortgages
Finally, you’ll need to be familiar with the two types of amortized (spread out over a period of time) mortgages. The kind of mortgage you’ll get will greatly affect the factors we discussed earlier, and if you choose one or the other, it can give you some room to renegotiate terms if your payments are on schedule.
● Fixed rate mortgages are loans that generally have a declared interest rate that stays the same throughout the term of the loan. This is regardless of how much your frequency is – for example, in the case of linear payback, where the periodic repayment gradually decreases.
● Adjustable rate mortgages start off similarly to fixed rate mortgages but change their interest rates after a certain period of time. This allows the borrower some breathing room in their repayment but can be more difficult to obtain due to the stricter assessment that lenders require before granting one.
The most important thing to remember is that it’s never a bad idea to be well-informed of whatever you’re getting yourself into. For mortgages and the industry associated with it, being familiar with industry jargon can be the key to making your repayments much, much easier.