The bank loaning the money is the lender. The amount you pay to the bank each month is your mortgage payment. The rate of interest on the loan is the mortgage rate (or the interest rate).
If you don't make your mortgage payments then the bank will repossess the house. Then they'll sell it to make sure that they can recoup the money they loaned to you, and that you didn't pay back.
The number of years it takes to pay back the loan is called the term, which in the U.S. is either 15 or 30 years. There are pros and cons of each:
| 15-year mortgage | 30-year mortgage |
| • Saves a bundle on interest | • Easier to qualify for |
How do you choose between the two? If you want the most flexibility then take the 30-year loan. You can still save on interest and pay your loan off early by paying the bank a little extra each month (or whenever you can afford it). The difference is that with a 30-year loan you get to dictate how much extra you want to pay, and therefore how much you want to save. With a 15-year loan you have to make bigger payments every month whether you like it or not.
On the other hand, if you can definitely afford the payments on a 15-year loan, and you don't trust yourself to make extra principal payments on a 30-year loan, then take the 15-year loan and enjoy the fact that you'll save a bundle of interest and pay off the loan in half the time, without having to do anything special.
If you're satisfied with that advice then keep reading. Otherwise you can check out more about 15- vs 30-year mortgages in the appendix.
Right now you should figure out how much money you have saved up that you can use for a down payment, unless you know you can get a loan with no down payment.
No comments:
Post a Comment