Don’t be scared of the terminology!
The first that you need to understand is that YOU DO NOT NEED TO KNOW EVERYTHING! Having a mortgage broker means that you do not need to know every little term that has to do with your mortgage. Yes, you should be familiar with the basics so that you understand how everything works but your mortgage broker can help with that. Do not feel silly about asking questions. When you hear a word that you are not familiar with just ask what that means. You are making a major purchase and you should make sure that it goes the way that you want it to. There are a lot of terms in the mortgage industry that are not used in every day conversations. In this post and over a few more we will define some of them and hopefully give you a description that anyone could understand.
… a lender who specializes in Mortgages. A mortgage broker is an expert in the finance field and is able to shop around for the best deal for the client in terms of loan conditions and interest rate.
A mortgage is a way to use one’s real property, like land, a house, or a building, as a guarantee for a loan to get money. Many people do this to buy the home they will use for the mortgage: the loan provides them the money to buy the house and the loan is guaranteed by the house.
In a mortgage, there is a debtor and a creditor. The debtor is the owner of the property, while the creditor is the owner of the loan. When the mortgage transaction is made, the debtor gets the money with the loan, and promises to pay the loan. The creditor will receive money back with interest over time (usually in payments made each month by the debtor). If the debtor does not pay the loan, the creditor may take the mortgaged property in place of the loan. This is called foreclosure.
A mortgage is the loan that you use to buy a house. The house value is the asset that the institution lending you money holds on to so that you pay them. This means that if you do not pay the money that you have agreed to pay they take the house. This is where foreclosures come in to the equation. So, over a period of years you will pay down the house. As you pay down the house you own more and more of it and the lender owns the rest till you pay off the total.
A lender can be a bank, credit union or private lender. This is the group or person(s) that lends you the money to buy your home. Because this is a major purchase there are laws in place to help the lender get their loan payed. This is what your mortgage is. The Lender will give you the money to buy the house and legally own part of your house till you pay them back.
Interest is the money that the lender makes for loaning you money. Here is some simple math: If the lender or mortgage broker gives you $100,000 to buy a home, and for doing this they are charging you %10 interest. This means that they make %10 of whatever you owe them annually. This is the fee that you pay to borrow the $100,000 they just take it over time instead of up front.
These are just a few of the terms involved when you are looking in to mortgages. We will keep posting more definitions with basic explanations to help you understand mortgages better.