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.
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.
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.
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.
Your home is your most valuable asset. It is probably the single largest investment you will make in your lifetime. Your home is more than a place to rest your head and raise a family. Your home contains equity. It is a treasured resource and in some cases, can even be used as an ATM (aka cash back mortgages and HELOCs – don’t worry we’ll get there).
Everyone who is looking to purchase a home will need a mortgage. But, what is a mortgage exactly and why do you need it? Besides being the term to describe a loan secured by real estate, a mortgage allows you to access funding to procure your dream home.
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