Mortgage Terms

Mortgage terms are a sticky area for many people. You need to know the terms of your current mortgage before you can create a loan modification plan.

A 30-year "fixed" mortgage is considered the "best" form of mortgage. This means that the amount you owed on your home after your down payment is paid back at a steady interest rate over a period of thirty years. You keep the same payment throughout the mortgage, but each payment pays less of the interest bill and more on the original amount of the loan.

Other terms of "fixed" mortgage exist, such as 10, 20 and 25 year mortgages. A shorter fixed term creates higher monthly payments. However, the total bill is less because interest works over time. Five percent per year for fifteen years is less than five percent per year for thirty, after all.

An "adjustable rate mortgage" means that the interest rate on the amount still owed can change at set intervals. If average mortgage rates go down, yours can go down with them. However, if the interest rate shoots through the roof, so does yours. Someone with a fixed mortgage can mostly ignore the ups and downs of the real estate market. If you have an adjustable rate mortgage, on the other hand, you must keep a close eye on current interest rates.

A "balloon payment" means that at the end of the mortgage term, you owe the lender whatever is left on the loan all at once. These are usually considered quite risky for everyone concerned. Either you have to come up with financing for the balloon payment, which can mean a higher interest rate for you on the back end, or you default on the loan which causes higher costs to the lender.

Once you know the exact terms of your loan, you can start creating a loan modification plan for you and your lender. Get your Loan Modification Toolbox today and save your home for foreclosure!