How Does a Mortgage Work
We want our clients informed. We do not believe in withholding constructive advice and information about your mortgage and what it entails. “How Does a Mortgage Work?” On this page, we will seek to briefly and generally explain how it all works. We believe good customer service is not just about our loan programs, but it is about empowering you to understand as much as you wish to know about the financial reality in front of you.
It is safe to assume that many could wonder, “How Does a Mortgage Work?” It is a legitimate concern for a wide range of people who are likely prospective or new home owners.
A mortgage, also called a home loan, is usually scheduled for payment over a 30-year period, but there are many different time spans—from 10, 15, or 20 years—in which a mortgage can repaid. Your mortgage is typically split into two parts: capital and interest. Capital is the full amount you borrowed for the house, and interest is the fee you owe the lender for lending you the capital. Capital is also known as your “principal” and it may or may not be the full value or purchase price of the house. For example, your capital loan could be for 80% of the value of the house. This percentage can also be expressed in a loan-to-value ratio.
Interest rates are one of the most unpopular yet inevitable factors of a mortgage. However, there are ways to control interest. For starters, interest rates can either be fixed or adjustable. A “fixed rate” is where the monthly interest calculation is unchanging for the life of the loan. An “adjustable rate” is an interest rate can fluctuate throughout the term of the loan—usually based on market rates.
Two other costs that are often factored into mortgages are property taxes and insurance. Property taxes are usually spread throughout the year and placed in a third-party escrow account until the time property taxes are due. Mortgage insurance is commonly added under certain circumstances and not always needed. For example, in conventional loans, as long as the buyer is able to “bring cash to the table” and provide a down payment of at least 20% of the mortgage, then there is no required mortgage insurance for the life of the loan.
Much of the mortgage process is searching, comparing, and choosing different lenders, rates, and options to find the most ideal choice for your given situation, but you do not have to do this alone. Call or message your mortgage specialists at Phoenix, today. We would love to help you choose the right loan and help you finance it the right way.
Phoenix Mortgage Specialists, Inc. is proud to serve all our clients across Georgia and East Alabama with premier mortgage services specially tailored to their respective preferences and needs. It is our greatest pleasure to be a consistent source of professional guidance and expertise for every prospective homeowner and every individual preparing to walk through this milestone in his or her life.
For any further inquiries beyond what is covered on this page, again, feel free to contact us. If you are still wondering, “How Does a Mortgage Work?” we would love to help clear things up and answer any of your mortgage-related questions or concerns. Thank you for choosing Phoenix Mortgage Specialists, Inc.