Definition of "Term"
The period used to calculate the monthly mortgage payment. The term is usually but not always the same as the maturity, which is the period over which the loan balance must be paid in full. On a seven-year balloon loan, for example, the maturity is seven years but the term in most cases is 30 years. Impact on Monthly Payment: The longer the term, the lower the mortgage payment but the slower the growth of equity. Borrowers who want to make their payments as small as possible select the longest term available. The reduction in payment from lengthening the term, however, becomes less and less effective as the term gets longer. Shorter term versus extra payments: A borrower can always shorten the realized term of a mortgage by making extra payments. For example, a borrower who selects a 15-year loan but wants to pay it off in 10 years can make an extra payment every month to bring the payment to what it would be on a 10. Assuming the interest rate is the same, the outcome is the same. An investment in a shorter-term mortgage is a little different than most other investments. Typically, an investment consists of a lump sum paid out at the beginning and the return is a series of payments received over time. This is the way it is, for example, with an investment in a deposit or bond. By contrast, when you invest in a shorter-term mortgage, your investment is a series of payments equal to the difference between the monthly payment at the shorter term and the payment at a longer term. And the return is a lump sum, equal to the larger proceeds you receive at time of sale because of the smaller loan balance that must be repaid at the end of the period. Staying on Schedule When Refinancing: Some borrowers want to refinance while staying on the same amortization schedule. For example, they took out a mortgage seven years ago that has 23 years to run and they want to stay on that schedule, rather than start with a new 30-year schedule. Lenders won't ordinarily make a 23-year loan. The best option, therefore, is to refinance for 30 years, but increase the payment by the exact amount required to amortize over 23 or any other period you wish.
Popular Mortgage Terms
A mortgage on which the payment rises by a constant percent for a specified number of periods, after which it becomes fully-amortizing. ...
One or more persons who hove signed the note and are equally responsible for repaying the loan. When One Co-Borrower Has Much Better Credit than the Other: A problem that arises frequently ...
A Web site of an individual lender offering loans to consumers. Most Internet shoppers want a list of lenders in whom they can have confidence, who will provide them with the information ...
A borrower with the best credit rating, deserving of the lowest prices that lenders offer. ...
Owner financing or seller financing is a trending real estate concept among homebuyers and sellers. The seller reveals in their asset’s advertising or listing if buyers can purchase ...
Same as term Interest Rate: The rate charged the borrower each period for the loan of money, by custom quoted on an annual basis. A mortgage interest rate is a rate on a loan secured by a ...
The total cash required of the home buyer/borrower to close the purchase plus loan transaction or the loan transaction on a refinance. Required cash includes the down payment, points and ...
A document that evidences a debt and a promise to repay. A mortgage loan transaction always includes a note evidencing the debt, and a mortgage evidencing the lien on the property. ...
Someone authorized by the original credit card holder to use the holder's card. While authorized users are not responsible for paying any charges, including their own, they are sometimes ...
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