Mortgage Calculator
What is Mortgage?
A mortgage is a loan used to finance the purchase of real estate, like a house or plot of land. It’s a type of secured loan, meaning the property you’re buying serves as collateral for the loan.
You (the borrower) take out the loan from a lender, which can be a bank, credit union, or other financial institution.
Loan Agreement : You sign a mortgage agreement with the lender outlining the terms of the loan, including the loan amount, interest rate, repayment period (loan term), and repayment schedule.
Repayment: You make regular payments to the lender over the loan term, typically 15 to 30 years. These payments consist of two parts: principal (the actual amount you borrowed) and interest (the fee you pay for borrowing the money).
Collateral: The property you’re buying acts as collateral. This means if you fail to make your mortgage payments, the lender has the right to take possession of the property through foreclosure and sell it to recoup their losses.
Types of Mortgage
There are different types of mortgages available, each with its own set of features and interest rates :
Fixed-rate mortgage: The interest rate stays the same throughout the loan term, offering predictability in your monthly payments.
Adjustable-rate mortgage (ARM): The interest rate can fluctuate over time based on a financial index, which can lead to changes in your monthly payment.
Key Takeaways
- A higher credit score will qualify you for better interest rates
- Owning a home comes with additional costs beyond your mortgage payment, such as property taxes, homeowners insurance, and maintenance.
- Get pre-approved for a mortgage: This will show sellers you’re a serious buyer and give you a better idea of how much house you can afford.