When we hear talk about buying a home we always hear the word mortgage. A mortgage is the word that is used that means a loan in relation to buying a home. Unless you are rolling in money chances are if you want to buy a home you have to take out a loan and that is called a mortgage. The bank that lends you the money for the mortgage is called the lender.
When you buy a home the monthly payments you make back to the lender/bank is called the monthly mortgage payment. The interest rate that is attached to the mortgage (and there is always interest) is called the mortgage interest rate. If for whatever reason you cannot make your mortgage payments the bank repossesses your home. The process of the bank taking back someone’s home is called going into default or foreclosure. When one goes into default the bank either sells the house back to the person while it is in foreclosure or it can go back on the market. The bank sells the foreclosed home to make up the money they lost. The money lost was the money they lent you and the money the person was not able to pay back.
The time it takes for someone to pay back a loan is called the term. In the United States we have 15 year and 30 year mortgage loan terms. The term deems how many years the lender will give you to pay back the loan or mortgage. At the end of the term ideally you own the home. People that prefer more flexibility choose the 30 year terms. 30 year terms are usually easier to qualify for and the monthly payments are relatively lower. When you opt for a 30 year term it gives you the possibility of building a better home and having more liquid cash on hand. You can pay a little extra each month with a 30 year loan term if you so choose. You also save a little more with the interest which can make it easier for you to finish paying off before the 30 year term ends.
The good thing about a 15 year term is it saves you 15 years of interest in the long run and the loan is paid off in half the time. The downside of a 15 year loan term is the monthly payment are bigger whether you like it or not. There isn’t a flexibility there like there is with a 30 year term. But if you are a person who can afford the 15 year term and don’t trust yourself to go with extra principal payments of the 30 year long haul then take the 15 year term. You save a bundle on the interest and have your home in half the time. And, if you have excellent credit some lenders will waive the down payment towards the home if you take a 15 year loan term.