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Tanza is a CERTIFIED FINANCIAL PLANNER and former Personal Finance Insider correspondent. He broke down personal finance news and wrote about taxes, investing, retirement, wealth building, and debt management. He ran a biweekly newsletter and a column in which he answered readers’ questions about money.
Loan Payment Calculator
If you are buying a home, the amount of the mortgage is usually the purchase price minus the down payment. If you are going to renew an existing mortgage, it is the capital that you owe after the last term of the mortgage.
The amortization period is the time it takes to pay off the entire mortgage, including interest. The amortization period can be up to 25 years if the mortgage is insured against default, and up to 30 years if it is not. For a new mortgage, the amortization period is usually 25 years.
A prepayment allows you to pay off some or your entire mortgage before the term ends. Most closed-end mortgages allow you to make annual prepayments of 10% to 20% without a prepayment fee. Most open mortgages can be paid off with no prepayment fees. Check the details in your mortgage document.
In the event of disability, serious illness, job loss, or death, creditor insurance can help you pay off your debt or reduce your balance, or cover some payments. Creditor insurance is optional on mortgages.
Mortgage default insurance protects your lender if you are unable to pay your mortgage loan. You need this insurance if you have a high-ratio mortgage, and it is usually added to the principal of your mortgage. A mortgage is high-ratio when the down payment is less than 20% of the value of the property.
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A mortgage is a long-term loan designed to help you buy a home. In addition to repaying the capital, you have to pay the interest to the lender. The house and the land that surrounds it serve as collateral. But if you want to own a home, you need to know more than just these generalities. This concept also applies to business, especially when it comes to fixed costs and closing points.
Almost everyone who buys a home has a mortgage. Mortgage rates are frequently mentioned on the evening news, and speculation about the direction rates will move has become a regular part of the financial culture.
The modern mortgage emerged in 1934, when the government – to help the country through the Great Depression – created a mortgage program that minimized the required down payment on a home by increasing the amount prospective homeowners could borrow. Before that, a 50% down payment was required. Today, a 20% down payment is desirable, especially since if the down payment is less than 20%, private mortgage insurance is required (PMI), which makes the monthly payments higher.
