Category: Mortgage

07/17/2019


What is a Mortgage and How Does it Work?

What is a Mortgage and How Does it Work?

Table of contents:

A mortgage is a loan in which property or real estate is used as an asset. The borrower is in agreement with the bank and receives cash and then eventually pays back the bank over a period of time. There are many places that you can get a mortgage loan.

What Is A Mortgage Loan?

A mortgage loan is entered into by home buyers who do not have enough cash at the time of purchasing their home. As a person borrows money from the bank, their home is used as collateral. There are many different types of mortgage loans and it is important to decide which loan is best for you depending on your situation. Loans are characterized by term dates, it is common for these dates to be between 5 and 30 years but it is possible to find loans up to 50-year terms. These loans are also indicated by fixed or variable interest rates and the number of payments made per period. You can use Excel to learn how to calculate your monthly payment or a mortgage calculator to see what your interest payment and monthly principal will be. The supply and demand for mortgages can change depending on the market. Based on this, banks may offer low-interest rates or unfortunately, they can only be able to offer high-interest rates. You can refinance your mortgage loan if you agree upon a high-interest rate and then sign at a lower interest rate a few years later. Mortgage Loans are important because it makes large purchases affordable for those who do not have enough cash at the time. Lenders take a risk by offering money to borrowers when there could be a chance that the borrower will not pay the money back. Borrowers also take a risk borrowing a large amount of money because if they are unable to pay it back then they will have a total loss of the asset. For most people, a home is the most valuable asset so mortgage loans help them to make their dream come true. Rates and terms are dependent on the person's job status and credit score.

Mortgage Loan Rates

Finding the best mortgage rate is important and to do this, you must compare products and rates with at least three different lenders. Lenders can offer more competitive rates the less debt you have and the higher your credit score is. When learning about mortgage loan rates you should know what annual percentage rate (APR) is and interest rate. The annual percentage rate is the interest rate and all other borrowing costs put together. This includes mortgage insurance and other fees which are shown as a percentage. This percentage gives you an idea of the overall borrowing costs. The interest rate is the fixed or variable fee the lender charges you to borrow the principal loan amount. Interest rates are also shown as a percentage. Different banks offer different APR rates and different interest rates but the average 15-year fixed mortgage rate is 3.24% and an APR rate of 3.45%

Where To Get A Mortgage Loan?

Where To Get A Mortgage Loan?

The best time to buy a house is in January because warmer weather means more homes will be listed for sale. January is usually a mini buyers market and during this time, homes have been on the market for at least three months so sellers are ready to make deals. Besides the season, figuring out when to buy a house is dependent on the supply and demand in the market. Before trying to find out where to get a mortgage loan it is important to get your credit score in good shape, compare rates with different mortgage lenders, get pre-approved for your mortgage, find out about fees and requirements, and learn the mortgage lending landscape. Some of the best places to get a mortgage loan include Chase and Quicken Loans. Chase only requires a 3% minimum down payment and is ideal for first time home buyers and people who plan to refinance their homes in 60 days or less. They offer electronic submission online and tracking of documents. Quicken Loans also requires a 3% minimum down payment and offers great customer service with online convenience. To find good mortgage quotes it is important to communicate with different banks and check the local newspaper for more helpful leads.

How To Calculate A Mortgage Loan?

You can calculate your mortgage payment using a spreadsheet program. This calculation is used to figure out the number of your monthly mortgage payments. Using the PMT function combines principal, number of periods and interest rate. Rate represents the monthly interest rate, nper represents the number of periods, and PV stands for present value. Inputting this information into a spreadsheet will help you calculate your monthly payment for the mortgage loan. You can use a formula to calculate your mortgage loan payment and this will be a good estimator as well. An estimator is a method used to determine an estimated value for something. You will need to know your number of payments, monthly interest rates, and the principal for this formula. For example, if you have a $150,000 mortgage with a 5% annual interest rate over 10 years your input value (P) would be $150,000. R stands for your monthly interest rate so it would be 0.05 divided by 12. N stand for your total number of payments, one for each month in 10 years which would be 12x10. These are free methods that you can use to calculate your mortgage loan and there are also free calculators online that can be used to calculate mortgage payment as well.


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