Common Concerns About Your Home Mortgage

this post answers the following questions
1. What is the principal amount in mortgage fees?
2. What is the interest in mortgage fees?
3. Where do my taxes go when paying for my mortgage?
4. Why is it required to purchase homemortgage insurance?
5. What is mortgageforeclosure?

Wherever you or your family may be, you can create a home. It is the people that make a home and not the structure. But even though this is true, and although there are so many housing options out there, including renting a house or leasing an apartment unit, there’s still nothing more gratifying than living in a house that’s your own. It is the quintessential American dream. But such dreams can be very costly, requiring you to shell out hundreds of thousands of dollars, or even millions. Most can’t afford to pay for a property in cash, and this is why many opt to get a mortgage.

What is a mortgage?

The simplest way to explain a mortgage is that it is a big financial loan. When you borrow money to buy a house, you borrow money from a lender and you put your property as collateral for your loan. In the event that you fail to pay your mortgage, the lender can acquire your property. He could keep it or sell it. The decision is his depending on how he wants to cover his losses.

4 Elements of Mortgage

Basically, a mortgage fee has 4 elements. These are: principal, interest, taxes, and insurance; or PITI. The principal amount is the total sum of money borrowed from a lender. The interest is the interest rate, which is the fee charged by a lender. As for the real estate or property tax, this is paid to the government. A large percentage of taxes goes to community developments. Homeowners are also required to purchase home insurance to protect them in case of fires or robberies. Getting flood insurance is mandatory for those living in high risk areas.

home mortgage

Photo source: http://www.flickr.com/photos/68751915@N05/6808984167/

What happens if I miss my mortgage payments?

In case you fail to keep up with your mortgage payments, you will be in danger of losing your home. This is known as foreclosure. Foreclosure is a serious concern which crops up once you fail to pay more than 3 mortgage payments. In case you miss a few payments, your lender can impose fines or penalties, including legal fees and late fee payments. To avoid foreclosure, try to pay the necessary fees. Make sure that you get in touch with your lender to inform him that you’re falling behind schedule. Your lender can also help you figure out a way to deal with the problem.

What can I do to reduce mortgage costs?

It can be difficult to keep up with mortgage payments. But there are some things that you can do in order to reduce mortgage costs. For instance, if you get a huge Christmas or mid-year bonus, you can put a large chunk of that money to pay for your mortgage. Remember that the interest rate of your mortgage is typically computed each day, and the lesser the amount of your mortgage, the lesser the total interest will be. Another way is to look for government schemes that assist mortgage payers, such as the program “Making Homes Affordable Plan.”

Citations:

Claire Campbell is a new homeowner who also met a few financial challenges when she purchased her new house. She writes about her experiences for www.Hayden-Homes.com and other real estate websites.

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