The modern mortgage market offers a variety of mortgage loans catering to the needs of homebuyers. The titles and details of these plans can become confusing, especially as new types are introduced continuously. You can make sense of these loan types, however, if you understand the basic principles that govern all mortgage loans.  

​

Basic Principle of all Mortgage Loans

• The home is used as security to back up the loan. A lender can force sale of the home if the borrower defaults by failing to make scheduled payments.

• The larger the loan compared to the value of the home, the more risky for the lender and, often, the more expensive the loan will be.

• Interest earned by the lender always is equal to the periodic interest rate times the outstanding principle balance of the loan. The periodic interest rate is the annual interest rate divided by the number of payments in the year (usually one per month).

• The required payment usually is a bit larger than the interest due so that some of the loan principal is repaid with each payment. This process is called Amortization and is why most mortgage loans can be retired when all the monthly payments have been made.

​

Need to speak to a lender or need a pre-approval?
If you are looking for a pre-approval or need professional loan assistance, contact me and I can send you the information to a perferred lender to assist you with your needs.

​

​