What Are Mortgage Loans Made Of?
Did you know that, when buying a house, you can save a lot of money by working with a real estate lawyer instead of a real estate agent? A recent lawsuit settlement involving the National Association of Realtors shows just how badly the system of real estate transactions is rigged against consumers. Buying a house involves a mountain of paperwork, to be sure; it is at least as difficult as filing taxes for a small business or acting as the personal representative of a family member’s estate during probate. You need a lawyer’s help for the more complicated legal matters. When it comes to figuring out which properties you can afford to take out a home mortgage for, however, all it takes is some research and some calculations. It turns out that the cost of a home mortgage involves several moving parts. To find out more about affordable real estate transactions, contact a Bronx real estate attorney.
Prohibitively Expensive Mortgage Rates Are a PITI
Mortgage lenders will only agree to issue you a home mortgage loan if they are sure that you can keep making the monthly payments, month after month, for 30 years, or however long the term of the loan is. Several components make up your mortgage, though, and those are divided across the many monthly payments. These are the elements of a home mortgage loan, as represented by the acronym PITI:
- Principal is the amount of money you borrowed from the mortgage lender. It is the sale price of your house minus the amount you placed as a down payment. On a 30-year mortgage, the principal accounts for only about half of each monthly payment.
- Interest on a home mortgage loan is compound interest, which means that if you pay more than the minimum principal amount each month, you will save money on interest over time. If you are lucky, you can get a fixed-rate mortgage, where the interest rate is guaranteed not to change, but if you get an adjustable-rate mortgage, then after the first few months, your mortgage interest rate is subject to market fluctuations.
- Taxes included in your mortgage payment are property taxes. These are calculated annually, based on the assessed value of your house. Your mortgage servicing company divides the tax payment into 12 monthly installments. Even though the principal balance gets lower with each mortgage payment, the taxes tend to get higher as the value of your property appreciates.
- Insurance in the context of a home mortgage is homeowners’ insurance. Many mortgage lenders require you to carry homeowners’ insurance coverage. This way, they can be sure that if your house sustains major damage, you can afford to repair it instead of walking away from your house and defaulting on your mortgage.
Getting an affordable mortgage loan requires you to be strategic.
Schedule a Confidential Consultation With a Bronx Real Estate Attorney
A real estate lawyer can help you make wise decisions about borrowing a home mortgage loan. Contact Cavallo & Cavallo in the Bronx, New York to set up a consultation.
Source:
finance.yahoo.com/personal-finance/piti-203535556.html
