Understanding Mortgage Terminology
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Mortgage – down payment
The amount of money that you pay in cash towards your home purchase. The rest of the purchase money will be made up of one or more mortgages. Saving up a down payment is one of the challenges of attaining home ownership. Different mortgages and purchase plans require a certain percentage of the purchase price to be paid as a down payment. Some people borrow the money for a down payment.
Mortgage – no money down
In some cases you can get a mortgage for the full cost of the home, without making a down payment. This is called a “no money down” mortgage. It is risky because if home prices fall and the value of your home goes down, you may well end up owing more money on the mortgage than your home is actually worth.
Mortgage – variable rate
A mortgage where the interest rate can vary over the life of the loan. A standard mortgage has an interest rate which is fixed for the term of the loan, usually several years. Variable rate mortgages usually start with a lower interest rate than standard mortgages, and if interest rates drop your rate does too – a good thing! If interest rates rise, though, your rate will rise too, and either your monthly payments will rise to match, or the amount you own on your mortgage may increase. great care is needed with these mortgages.
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