Mortgage Jet’s Mortgage Blog

A mortgage is a way for potential homeowners to buy their homes without having to pay all of the money up front. Essentially, it works much like a collateral loan, with the house being the collateral. The main difference is that the bank originating the mortgage loan is the real owner of the home until the mortgage is paid off and the title transfers to the homeowner. Most homeowners pay some amount of down payment to lower the amount of the mortgage. Some mortgages don’t require a down payment, and some require as much as 20 percent of the purchase price to be paid up front.

Because the bank or mortgage lender owns the title of the home, they have the power to seize the house if the mortgage payments fall behind. Foreclosure laws are specific for each area, however, with state laws determining the timeframe of a foreclosure. It normally takes several missed payments before foreclosure proceedings begin.

A mortgage payment is a mixture of the principle, which is a portion of the original loan amount, and the interest due on that payment. There may also be money added into the payment that goes toward escrow accounts for the property taxes and the homeowners insurance. These amounts are placed into escrow and sent directly to the county and the insurance agent to ensure that they are pain in full and on time.

Interest paid on a mortgage is often paid disproportionately toward the beginning of a mortgage. This means that more of the mortgage payment is made up of interest at the beginning of the loan than it is at the end of the loan. Very little of the loan principle is paid during the first two years of most mortgages. To pay off the principle more quickly, many homeowners choose to pay extra money on top of the mortgage payment and directing the extra amount toward paying off the principle.

The mortgage begins when the loan is approved by a bank or other mortgage lender. The terms for the mortgage, including the amount and the number of years until it’s paid off, are spelled out in a series of legal documents that must be signed by both parties. Most mortgages last for 15, 25 or 30 years. The payments will be paid each month during those years, with the title granted to the homeowner at the end of them.