April 15, 2006
What is a Mortgage?
A mortgage requires you to pledge your home as the lender's security for repayment of your loan. The lender agrees to hold the title or deed to your property (or in some states, to hold a lien on your title or deed) until you have paid back your loan plus interest.
Mortgage Amount and Term
The mortgage amount is the amount of money you borrow from a lender to pay for your house. The term is the number of years over which you can pay back the amount you borrow.
The length of your mortgage repayment period will directly affect your monthly mortgage payments. For the same mortgage principal amount, you will find that the shorter your repayment period is, the higher your monthly payments will be, but the total interest you pay over the life of the loan will be less. On the other hand, the longer your repayment period is, the lower your monthly payments will be, but the total interest you pay over the life of the loan will be more.
The most popular mortgage term is 30 years. By extending payment over 30 years, you keep your monthly housing costs low. If you can afford higher monthly payments, you can select a mortgage term that is shorter: there are 20-year, 15-year, and even 10-year fixed-rate mortgages available from most mortgage lenders.
