Mortgage Loans
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What is a Mortgage?
Mortgage loans are extended by different types of Financial Institutions. Examples include Mortgage Banks, Savings and Loans [Thrifts], Savings Banks, and Credit Unions. You could also solicit the assistance of a broker in navigating the maze of financial institutions to find one that could meet your needs. This is a very popular option with many people.

The loan is typically secured [or collateralized] by a piece of Real Estate Property. Of course, the mortgage is also typically paid back with interest [they could also have other fees].

There are five basic components to a mortgage:

  • Principal: the original loan amount
  • Interest Rate: the periodic [daily, monthly or annual] fee for the privilege of using the principal you borrowed.
  • Term: the length of time a mortgage is scheduled to be paid back. Mortgage terms are typically 15, 20, or 30 years.
  • Closing Costs: fees are designed to cover the expenses of originating the loan. Examples include Appraisal Fees, Loan Origination Fees, Yield Spread Premium, Mortgage Broker's Fees.
  • Points: Sometimes referred to as Discount Points. One point equals 1% of the value of the loan, which can be used to "buy down" or lower the interest rate. For example, paying 0 points on your loan may yield a 7% interest rate, but paying 1 point on your loan, either out of pocket or financed in the loan, may yield a 6.5% interest rate. Should you choose to finance the one point, you will be financing a slightly higher loan amount, but since the interest rate associated with the loan is lower, your monthly payments are usually lower.
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