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Understanding Your Mortgage

Posted on September 3, 2013 by Justin

Learning about your mortgage isn’t necessarily the most exciting task, but it is an important one. We here at Parry Homes have come up with some information you may find helpful when it comes to deciphering your home mortgage.

First, let’s review some common terms that you should know that relate to your mortgage. A mortgage is a specific type of loan used to purchase a house. Mortgages are paid off with set monthly payments, either at a fixed rate or at an adjustable-rate; fixed rate mortgages have a set interest rate that does not change over time, while adjustable-rate mortgages can change with the market. Each type of rate has its own advantages and disadvantages.

Principal is the amount of debt left on a loan, excluding interest. An appraisal is an assessment of property to determine its market value, and this number is subject to change over time. Depending on your home’s appraisal, you may be subject to increased taxes as your property value increases.

Foreclosure is the process of the bank taking back the property, and occurs only when a homeowner defers on their loan payments (i.e. does not pay for several months or pays inconsistently). Collateral is the property promised to a debt; if you are unable to make payments and have pledged collateral to your mortgage, your lender may take the property and sell it in order to earn back the money they have not been paid through the mortgage agreement.

Next, let’s take a look at the housing market so we can understand where things sit right now. As of August 28, mortgage rates ranged from 3.61% up to 4.77%, depending on the terms of the loan and the repayment period; Pittsburgh’s loan rates are reflective of the market. Though these numbers are slightly higher than what we’ve been seeing in the recent past, they remain historically low and can be attributed to recent changes in the market.

After the housing bubble burst around 2008, new home sales plummeted, foreclosure sales were up, and it was considered a buyer’s market. As the American economy began to recover, home prices slowly crept up. Now that things are back to “normal,” mortgage lenders have began steadily increasing their rates because the market right now can support it.

Though rates have increased to a rate hovering around 4% for now, there is speculation that rates will continue to increase over the next year or two. This makes now the best time to purchase a new home, contrary to popular belief. You’ll avoid the increasing mortgage rates and still be able to reap the financial benefit of relatively low lender interest.

Parry Custom Homes is an established homebuilder in the Pittsburgh area. For additional information about our services, call (724) 863-0199. 

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