Love can express actions that can move emotions by the words we choose to repeat our story. Love is a choice every day!
How A Mortgage Works
In the initial phases of your mortgage, a significant portion of your payments goes toward interest. For a deeper understanding, scrutinize the documents signed during the closing process—specifically, locate the document detailing the APR (annual percentage rate). This figure encapsulates the total cost of your home over the mortgage’s lifespan, incorporating the interest rate, points (if you opted to pay to reduce your interest rate), the origination fee (charged by the lender for acquiring the loan), and mortgage insurance premiums (applicable when your down payment is less than 20 percent).
It’s crucial to note that while the APR covers these substantial elements, it excludes certain fees like application fees, late payment charges, title insurance, property appraisals, or document preparation. Additionally, processing, application, and underwriting fees stand out as alternative avenues through which lenders generate revenue in the mortgage process. By grasping the intricacies of these components, you gain a more comprehensive understanding of the financial landscape woven into your mortgage journey.
** Remember that interest accrues daily on your mortgage loan. **
Example
For example, if bank (A) offers a 30-year fixed mortgage (interest rate stays the same) for $150,000 at 6.5% interest rate. The total amount that you would pay for your home after the 30 years on this mortgage will end up being $341,316.73. Out of that mortgage amount, the interest that you will be paid over the course of the loan will be $191,316.73!
Your monthly payment will be $948.10 and $139.71 will go towards the principal, and $808.39 will go towards the interest in the first twelve years of your mortgage. The last payment that you will make on this loan will look like this: $915.55 will go toward the principal, and $32.55 will go toward the interest.
This example came from www.myamortizationchart.com. Check it out, punch in numbers, and hit the calculate button!
You can now see how banks are really not in business to own your home. The banks are in the business of lending money.
On average, homeowners refinance their mortgage every five to seven years to either get a better interest rate, pull cash out, or if they fall behind on their mortgage do a loan modification. That’s why banks like it when people refinance their homes every five to seven years because that resets the clock to make more money for them!
When was the last time you refinanced your mortgage?
