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ØMortgage and finances.
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ØWhat is a mortgage?
A
mortgage is a loan which is secured by real property. Most people use
mortgages to purchase or refinance their home. As with other loans, you
must apply for a mortgage and get approval. The amount you can borrow
depends on several things, such as your income, your total debt and
your monthly expenses.
Once
your mortgage is closed, you receive the total amount of the loan at
once, which is used to pay the seller (in a sale transaction) or pay
off any existing loans on the property (in a refinance transaction.)
You then repay the loan in monthly payments according to a
predetermined schedule. Most mortgages today are for periods of 15, 20,
or 30 years.
To determine the right type
of mortgage for your needs, you should consider:
How much cash you have
available for the down payment and closing cost.
Whether you think interest
rates will rise or fall.
How long you plan to stay
in the home you are purchasing or refinancing.
Two key definitions to
understand:
Closing
Costs: There are several kinds of fees associated with a mortgage. Many
lenders charge an origination fee and a processing fee. Other fees
associated with loan closing include, but are not limited to, your
attorney's fees, filing fees, mortgage taxes, title search and title
insurance. You may also be asked to pay real estate taxes and/or
establish escrow accounts for real estate taxes and home owner's
insurance.
Annual
Percentage Rate (APR): Annual percentage rate or APR is the actual cost
you are paying for the mortgage loan. The APR reflects the cost of your
mortgage loan as a yearly rate. It will generally be higher than the
interest rate. All fees that are paid directly to your lender, the
interest rate paid on the mortgage, and any mortgage insurance premiums
are also considered when calculating APR.
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