If you are planning to secure a home with a mortgage loan, it is suggested that you do some research about the subject. Or don’t hesitate to ask your mortgage counselor or lender. You can always search the internet for articles about mortgages and do some simple analysis on the basic terms that are used in mortgage transactions. For example, you must have a working knowledge of the interest and the term of the loan. These are two important words that can teach you to find the best mortgage lender to finance your home. Selecting the term on a mortgage is not easy. Your choice of the lifetime of your loan will affect your finances as long as you are bound to pay it under the mortgage contract.
The Mortgage Term Explained
The word term in your mortgage contract refers to a number of years you will have to pay your loan under the mortgage agreement. Mortgage loans are normally long term that could typically last for 15, or 30 years depending on the agreement of the lender and borrower. If you are the borrower, imagine paying your loan for 360 months in 30 years. Within that long period, you are bound to your lender in honoring the terms and conditions of the contract.
The Borrower’s Obligations
Generally, a mortgage contract contains the provisions that pertain to the obligations of the two parties. The borrower is obliged to comply with the following.
- He is obligated to pay his account on time.
- He should pay the taxes due on the property.
- He should maintain the property in good condition at all times.
- He should cover the property with an appropriate insurance coverage.
The Lender’s Responsibilities
On the other hand, the lender is usually required to perform the following obligations under the contract.
- He should not change the interest rate and term of the contract before the expiration of the agreement unless agreed otherwise.
- He should not demand a full payment of the loan when it is not yet due unless it is indicated on the contract in case of default.
Always Be Ready
There are lenders who will charge you the possible lowest interest rate and give you a sort of leeway on some provisions on the contract. Don’t be too confident as it could be a trap to dispossess you of your property at a certain point. Read the fine print in your mortgage contract. You might get a penalty which is greater than what you might have expected.
Always be wary when there are provisions that are too good to be true. Don’t forget that your house is at stake here under the mortgage contract. If you break your covenant, there’s no way you can win your way out.
If you happened to sign a mortgage loan with terms that will put you at a disadvantaged position, think about a refinancing scheme and pull yourself out from the mess. You may not survive the long years having to bear unfavorable terms. Don’t rush when selecting the terms on a mortgage. It could cost you a substantial amount just to get out.