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Mortgage Repayment

The American Dream…is to own your own home.  A home is likely the largest expenditure you will ever make.  There are many different types of mortgage loan products that are available in our current economy today.  With all the options, you should be able to find one that meets your needs in terms of the mortgage repayment.   

Understanding how mortgage repayment works and what it can mean to you will help you decide which loan product is best for you.  Your total mortgage repayment will equal the amount of the initial loan, or the principal, and all of the interest that you paid over the years in order to have the loan.  These added together will constitute the total cost of your mortgage.  When you take out a mortgage loan at a fixed rate, the interest is amortized over the term of the loan.  Often, the interest will total 3 to 5 times as much as the principal over the entire term.  If initial interest rates are higher, then the overall total of interest you will pay is going to be higher as well.  For this reason, when rates are low, as they are today, many people will take out loans or go through mortgage refinancing to get a new loan with the lower interest rate.   

With a fixed rate mortgage your mortgage repayment is a set monthly amount for the loan term.  In other words, you will pay the same amount each month for the duration of the loan for principal and interest.  However, if you select an adjustable rate mortgage, also known as an ARM, whether for a new loan, a bad credit mortgage or a mortgage refinance, you will find that your monthly payments will be different depending on when the rates adjust and what the current rates are.  There are also balloon mortgages which will be different than a reverse mortgage or an interest only mortgage.  Each different type of loan will have a different way for the mortgage repayment to work.   

The mortgage repayment terms are set forth in your original contract.  This is where you see how you will be paying back your loan.  Before you sign anything, you should make certain that you understand exactly how you are required to pay back your loan and if there are any stipulations on whether or not you can pay some or all of it off early.  Ask your lender if there is a prepayment penalty for paying the loan off early.  Many people like to put extra money toward the principal amount of the loan either on a monthly or yearly basis. This cuts time and interest cost off of their loans.  Regardless of the loan type you end up going with, do some research and make sure it is the right one for you.