First Mortgages

So, you’re ready to buy a home. Congratulations! Home ownership is a big step and you should pat yourself on the back because you’re about to make one of the most rewarding financial purchases ever.

What Is a First Mortgage?

A first mortgage doesn’t mean that it is your first time taking out a mortgage; it refers to the primary lien against the real estate you wish to buy. Although most people have never taken out a mortgage before when they apply for their first one, it always refers to the property itself, not your level of home buying. Your mortgage is a security blanket for the lender. It tells them that you will repay your loan over a period of time and they do not have to worry about you running away without paying your loan in full. Should that happen, they will be allowed to sell the property. Of course, you will never do that because you aren’t a crook.

How Do I Pay My Mortgage?

Your mortgage payments are usually due monthly, either in one lump sum or bi-weekly. At first, the bulk of your payments are split between the interest (money paid regularly at a decided rate when money is lent) and the principal (the amount you borrowed from the lender).

In the beginning, most of your payments go towards interest. Your principal will only decrease by a small amount at first. However, over the life of your mortgage your principal will decrease significantly. The amortization period for first mortgages are usually between 25-30 years, which may seem like a lifetime but in reality is an ideal amount of time to have pay off your mortgage in full.

Will a Broker Give Me Better Results For My First Mortgage?

Working with a mortgage broker offers many benefits over getting a mortgage directly from your bank. If you’ve never owned property before and this first mortgage is an actual first for you, a broker will have a better time getting you the package you need versus the package that will make them the most money. Your bank can only offer you their products and they may have a quota of what they need to offer in order to make a profit. A mortgage broker will give you better results for your first mortgage because they have access to many lenders as opposed to just one.

First Mortgages – Fast Facts

• There are two types of mortgages: open and closed.
• Closed mortgages usually have lower mortgage rates than open ones.
• A prepayment privilege allows you to make extra payments towards your mortgage at certain agreed upon times in a closed mortgage, or whenever you feel like it in an open mortgage.
• The amortization period is the amount of time it takes for you to pay off your mortgage completely.
• The mortgage term refers to the length of time your agreement and interest rate is in effect, usually five or more years.
• At the end of each term you are able to renew your mortgage.
• Interest rates can be fixed or variable but there does exist a hybrid rate that is not generally recommended for your first mortgage.