Sweet Deal | 4 Keys To Understanding the Terms of Your Home Loan

A home mortgage often represents the largest amount of money that the average family will ever borrow. As such, it is an important, and sometimes intimidating, experience with unfamiliar language and an enormous amount of paperwork. Understanding a few key concepts will help you to get a sweet deal with the best terms in which to pay off your mortgage loan.

1. A Bigger Down Payment Can Earn a Better Interest Rate

All financial institutions will generally offer mortgage interest rates within the same range. To check out where average rates stand, take a look at our Weekly Mortgage Watch. If you put down a larger down payment on a home, it will help you to get an interest rate at the low end of the scale that will cost you less in the long run.

Although it is tempting to provide the least amount of down payment necessary to get a mortgage, it can often be the most expensive way to finance your home purchase, and therefore is not beneficial over the long term. An FHA payment calculator can provide information on how much you can expect for your monthly mortgage payment.

2. Know What Happens if Your Payment is Late

You will probably be conscientious about sending your mortgage payments on time every month, but unusual circumstances can occur, and you may find that your payment must be paid a bit late. Know in advance how much time you have before your payment is considered past due. Usually a late fee will be billed on your next payment.

3. Understand Your Amortization Schedule

Your financial institution will provide an amortization schedule, which is a table of how much of your payment goes to paying off interest and how much goes to paying off the principal amount.

You will notice in the beginning, the majority of your payment goes toward the interest on the loan. As time passes, more of the payment amount will go toward the principal increases. You can increase the amount that lowers the principal amount by sending in a higher payment, designating the money for the principal.

4. Check the No Pay-Off Penalty

Before you sign on the dotted line, make sure your mortgage loan does not have an early pay-off penalty. This is an additional amount you will have to pay if you pay off the loan before the end of the mortgage term. If you decide to sell your home and move up to a larger or smaller home, this penalty can be a significant expense.

The key to getting the best terms on your home loan is understanding the process. Team up with a First Team agent and start getting your home buying ducks in a row so you can grow your personal net worth.

Email us at clientservices@firstteam.com

Call us at 888-870-1142


This guest post is written by Anica Oaks, a professional content and copywriter who graduated from the University of San Francisco. She loves dogs, the ocean, and anything outdoor-related. She was raised in a big family, so she’s used to putting things to a vote. Also, cartwheels are her specialty. You can connect with Anica here.

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