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Most aspiring homeowners are faced with the challenge of understanding how the mortgage works. This has led many to seek a mortgage advisor’s help to help them gain a better understanding of mortgage services. However, the terms used in mortgage deals are simple and easy to understand. This article explains some of them.
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Loan Principal
Loan principal refers to the actual amount you’re seeking from a mortgage broker. It’s the amount of money given to finance your homeownership plans. Please note that the amount to be repaid will include other costs, like interest, and you’ll have to pay more than the principal amount.
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Loan Interest
Loan interest refers to the amount of money that the mortgage services provider will charge you for the loan taken. It is billed as a percentage of the principal amount and is paid at regular intervals plus the principal amount. For example, if your lender charges an interest of 5% and you take a loan of $10000, you’ll have to pay interest amounting to $500 for the first year.
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Loan Term
Loan term refers to the period given for you to repay the loan, which is the principal amount plus accumulated interest. This period will be agreed upon by you and your mortgage lender, and will mainly be influenced by your ability to pay. It is worth noting that various mortgage lenders will have different terms. However, most of them involve long periods of between 5 to 30 years.
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Loan Repayment
As the name suggests, this refers to the amount of money owed and how it will be paid. Depending on what you agree with your lender, you’ll pay a certain amount regularly, say monthly or yearly. The amount covers the borrowed sum plus other charges like interest rate.
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Loan Amortization
Despite sounding so technical, this term refers to your loan repayment. In simple terms, amortizing means paying your loan plus the interest accumulated. If, for example, you pay a monthly installment of $500, your loan will be amortized with the same value each month.
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Remortgage
Remortgage is a term used to describe the process of taking another mortgage loan by using an existing mortgage as either security or use its proceeds to pay the new loan.
Conclusion
It’s common to get a bit confused when seeing mortgage services due to the complicated terms used in the trade. This is not the case anymore after reading this article. Understanding these elements, used by mortgage lenders, you’re in a better position to secure good mortgage deals. In any case, a mortgage advisor will help you understand them better and know how they work.
