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MortgageA mortgage is a legal document you sign to show that you have granted the lender a lien on your property as security for repayment of a loan, giving the lender the right to take your property if you do not repay the loan. Some states call it a deed of trust instead of a mortgage.Mortgage Loan A mortgage loan is money you borrow from a lender to finance the purchase of real estate, the land, house, and all other buildings. You the borrower, (mortgagor) in this mortgage loan agreement, gives the lender (mortgagee) a lien on the property as collateral for the loan. This mortgage loan will have specified payment periods and interest rates. Your lien on the property expires when the mortgage is paid off in full. Shop around. Mortgages and rates vary. Keep in mind that interest rates change frequently, even daily, so contact several mortgage lenders on the same day to comparison shop. The lowest mortgage rate may not always be the best choice for you. Rates are important, but also consider the overall cost of the loan. Fixed Rate Mortgage A mortgage whose interest rate and monthly payment does not change during the entire term of the loan. Adjustable Rate Mortgage (ARM) Also known as a variable rate loan, usually offers a lower initial rate than fixed rate loans. The interest rate can change at specified time periods based on changes in an interest rate index that reflects current finance market conditions, such as the LIBOR index or the Treasury index. The ARM promissory note states maximum and minimum rates. When the interest rate on an ARM increases, the monthly payments will increase and when the interest rate on an ARM decreases, the monthly payments will be lower. Balloon - Reset Mortgage A mortgage with monthly payments based on a 30 year amortization schedule and the unpaid principal balance due in a lump sum payment at the end of a specific period (usually 5 or 7 years) earlier than 30 years. The mortgage contains an option to reset the interest rate to the current market rate and to extend the maturity date provided certain conditions are satisfied. Prepayment Penalty Mortgage (PPM) Prepayment Penalty means a lender will charge a fee to the borrower for paying off the entire loan or a large portion of the principal (generally an amount that exceeds 20% of the original principal balance) before the end of the term of the loan, and with the "prepayment penalty mortgage" (PPM), the penalty in effect range is usually between 2 to 5 years from the start of the loan. Always check with the lender if you can pay extra payments or pay the entire loan off early (if you choose) without a penalty. More about Prepayment Penalty Mortgage Programs |
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