Defining Mortgage Loan Terms For Everyone
Defining Mortgage Loan Terms For Everyone: There is a mad competition nowadays and this can be seen in just about anything. Some point to society norms as the culprit, but that is really quite unfair. How can people be blamed for trying to do the best that they can in an era of rising inflation and price hikes?
Inflation and other factors increasing at unprecedented rates have also provided a huge boost to the mortgage industry with buyers now flocking to understand terms for availing a mortgage loan and eventually securing one.
Terms you should familiarize yourself with:
Mortgage is quite a complex topic, and in order to land the best deal, it is important that you understand what the agent is talking about. While most try their best to break down the complex terms into the simplest of words to make it easy to understand for all, it never hurts to have a basic grounding in the information that would be useful to you in the future.
It refers to the monthly installments that are paid in lieu of repaying the debt. They include both interest and principal amounts.
- Annual Percentage Rate(APR)
The term is self-explanatory; it is the rate that is charged on an annual basis on the loan.
- Buy Down
When a borrower attempts to secure a lower interest rate for the initial term of the loan, it is referred to as a buy down.
- Buy Up
In some cases, a borrower may accept a higher interest rate if it benefits him/her in the long run.
- Caps
Since interest rates rise and fall over a period of time, a maximum amount is set that can be charged as interest and is called caps. If interest rises above this amount, the borrower will not be charged the higher amount.
- Collateral
The property that is secured to the repayment of the loan is called the collateral.
- Closing Date
This is the date on which property is formally transferred to the borrower. Usually this is after the loan has been repaid.
- Down Payment
A certain amount of the total value of property is paid up front and is called the down payment.
When looking to obtain a loan, it is always helpful to look into the terms for availing a mortgage loan beforehand.
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