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Updated by Fusion 360 on Dec 23, 2014
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5 Unfamiliar Mortgage Terms Every Consumer Should Know

Many individuals are confused by several terms they come across when learning about mortgages. However, it is extremely important that consumers understand various mortgage terms, even when they are unfamiliar. Overall, individuals should understand adjustable rate mortgagees, fixed rate mortgages, points, amortization and closing costs.

Adjustable Rate Mortgage

An adjustable rate mortgage is a type of mortgage that has a fixed rate of interest for a set period of time. However, after the predefined amount of time has passed, the interest rate is likely to fluctuate over time. Generally, this loan is very popular with mortgage companies because its initial period offers borrowers a lower interest rate.

Fixed Rate Mortgage

In a fixed rate mortgage, the interest of the loan never changes. Although this type of loan is popular among many new homebuyers, it’s important to understand that fixed rate mortgages can last from 10 to 40 years.

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Points

Points

Points are simply percentage points of a loan amount, which often help individuals save money. However, this is not always the case. For example, some mortgage companies allow their customers to buy points in order to get a lower interest rate for the life of their loan, but only individuals who will be in a property for more than a few years are generally advised to buy points.

Amortization

The amortization of a loan is simply how the loan is to be repaid. For example, an individual may receive a breakdown each month of how much they will pay and how much they have paid since their mortgage began.

Closing Costs

Closing costs are costs that the buyer must pay during the life of their mortgage. Overall, there can be several closing costs, but lawyer fees are generally the most common.

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Writer

Writer

Mackenzie Martin is a finance writer. Information provided by Castle & Cooke Mortgage (NMLS# 1251). Mackenzie writes for Fusion 360, an advertising agency in Utah. Find her on Google +.

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