Home Mortgage

All about home mortgage loans

Getting a home mortgage is one of the most important financial decisions you'll ever have to make. Finding the right home mortgage loan is going to take some effort and research on your part, and if you're shopping for your first home mortgage, there's a lot you need to know before you get started.

Home Mortgage Basics

The two most common mortgage types are fixed rate mortgages and variable rate mortgages. The fixed type locks you in at a single home mortgage interest rate for the life of your loan, while variable mortgage interest rates shift up and down to reflect changes in the prime rate.

Once you've been paying your house off for a while, there are other, more complex types of home mortgages available to you. A reverse mortgage can be used to release the equity you've built up in your home, and you can also use a second mortgage as an emergency measure to access capital that would otherwise be tied up in your home mortgage loan. Some lenders use the term "home equity mortgage" interchangeably with "second mortgage."

The Finer Points of Home Mortgage Loans

There's a lot more to know about mortgages than amortization periods, interest rates and monthly payment amounts. You need to know what additional fees, charges and penalties you're subject to, as well as your lender's policies on home mortgage refinancing, paying off your loan early and selling your home.

For example, it's common for lenders to allow borrowers to exceed the amount of their monthly payment by up to 100 percent without penalty. However, beyond the double payment threshold, penalties kick in — after all, it's in the lender's interest to keep the debt active for as long as possible. If you think you might be in a position to make extra payments on your mortgage, you should know your lender's policies on this subject backwards and forwards.

Also, some lenders attach conditions that penalize you for selling your home at a profit in the first few years of your mortgage. They do this to maximize the return on the investment they made when they loaned you the money to buy the house. If you move around a lot, you should exercise caution so you don't get trapped into paying a hefty penalty for selling early.

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