Mortgage - Home Mortgage

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Home Mortgage Payments

The most important aspect of the home mortgage for the average person is the monthly payment.

When you take out a mortgage you agree to pay it off by making a payment each month for the duration of the mortgage. Each payment includes the interest and the principal of the mortgage. The principal is the balance of the mortgage; the interest is the additional money the provider charges a homeowner for the money lent.

Most mortgage agreements require a homeowner once a month for the duration of the mortgage. In a 30 year mortgage the borrower will have to make 360 payments. In a 15 year mortgage a person will have to make 180 payments.

The amount of the payments will usually exceed the amount of the mortgage. This additional amount is the profit the mortgage holder makes.

Mortgage Payments

When you take out a mortgage it is always important to calculate what the monthly payments will be. This will tell you if you can afford that mortgage or not.

A good rule of thumb is this, never take out a mortgage unless you have the savings or additional income available to make several months’ mortgages payments. If you don’t have the ability to make a few months mortgage payments you probably should not take out a mortgage. Never take out a mortgage unless you feel you have the ability to meet mortgage payments.

Types of Mortgage Payments

If you are uncertain of your future income it might be a good idea to see if you can take out an interest only mortgage. In an interest only mortgage the only payments you are obligated to make are the interest payments.

Payments on an interest only mortgage will be substantially lower than those on a standard mortgage. One thing you must remember is that you will still have to pay off the principal on an interest only mortgage. You’ll just be able to pay it off at your discretion.

One type of mortgage to avoid is an adjustable rate mortgage or an ARM. In an ARM the mortgage holder can change the interest rate at any time. This means the interest rate and the payment can be raised at the mortgage holders’ discretion.

The best mortgage to get for the average person is a fixed rate mortgage. In this traditional mortgage, the interest rate and the amount of the mortgage payments are locked in for the life of the mortgage. With a fixed rate mortgage, a homeowner will always be certain of their mortgage payment.

When to Pay More

One thing many people forget about mortgages is this: you have the ability to pay more than your monthly mortgage payment. By paying more than the mortgage payment you can pay down your mortgage faster.

Paying off your mortgage faster will reduce your debt load and free up more of your income for other purposes. It can also improve your credit record, and enhance your possibility of getting other kinds of loans.