Mortgage Practice

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What is a mortgage?

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A mortgage is a loan specifically used to purchase real estate, where the property serves as collateral for the loan.

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What does 'down payment' mean?

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A down payment is the initial amount of money paid upfront when purchasing a home, typically expressed as a percentage of the total purchase price.

Front

How do you calculate the total payment on a mortgage?

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Total payment = Monthly payment x Number of months in the loan term.

Front

What is the significance of the interest rate in a mortgage?

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The interest rate determines how much extra money will be paid on top of the principal amount borrowed over the life of the loan.

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What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage?

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A fixed-rate mortgage has a constant interest rate throughout the loan term, while an adjustable-rate mortgage has an interest rate that may change at specified times.

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How is the monthly payment on a mortgage calculated?

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Monthly payment is calculated using the loan amount, interest rate, and loan term, often using a mortgage calculator or formula.

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What does 'amortization' mean in the context of mortgages?

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Amortization is the process of paying off a loan over time through regular payments that cover both principal and interest.

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What is the purpose of mortgage insurance?

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Mortgage insurance protects the lender in case the borrower defaults on the loan, often required for loans with a down payment less than 20%.

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What is equity in a home?

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Equity is the difference between the market value of a home and the amount still owed on the mortgage.

Front

What is a loan term?

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The loan term is the length of time over which the loan must be repaid, commonly 15, 20, or 30 years.