Financial Factors of a Mortgage

When looking for a mortgage there are a few financial factors one should keep in mind. Changes to these factors will drastically change the amount of interest paid, possibility of penalty charges and required monthly payment amounts.

The Face Value

The total amount of the mortgage that is registered against the property. This isn’t necessarily the amount the borrower received, but it is the amount for which the borrower is liable.

The Term

This is the time that the contract will be in force. After this time, the contract must either be paid in full or renewed with the current lender. However, one can refinance with or switch to another lender. This has the same effect as paying off the previous mortgage in full. Switching to another lender is often the better option for most people as you can ensure that your next mortgage is the best mortgage for you (best interest rate and terms) in today’s mortgage market. You are not blindly accepting whatever interest rate and terms your previous lender wants to renew at.

The Amortization

This is the total number of years that it will take to fully reply the amount borrowed. FYI, there are no amortization period for interest only payments.

The Interest Rate

The amount of interest charged to the borrower. Remember, slight changes in your interest rate will significantly increase the amount of interest you pay.

The Compounding Frequency

Legally, lenders can only compound annually or semi-annually. They must indicate this on the mortgage.

The Payment Amount

Based on the face value, interest rate, payment frequency and amortization, the contract will lay out the amount of each payment.

There are several financial components to a mortgage. Slight changes can lead to huge savings, so it is important to obtain the best interest rate and terms for you. To do this, find a mortgage agent with access to numerous lenders, so they can compete for your business. Contact me right now to get a personalized solution to your unique situation.

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