Indianapolis Mortgage Terms – A Few Basic Mortgage Words You Should Understand

Indianapolis Mortgage Terms – A Few Basic Mortgage Words You Should Understand

An Indianapolis mortgage is a form of a loan intended for buying a house. Like any other loan, a mortgage loan charges interest. It differs from other loans in many ways that have to do with the interest rates charged and the time taken to repay the loan.

Common terms referring to mortgage loans include:

Interest and Principle

A large amount of the repayment consists of interest charges while the remaining amount covers the repayment of the principle. The interest rate is the charge that the bank makes you pay to lend you the money. The principle is the amount you actually owe on the home, minus the down payment. This interest rate will vary from one Indianapolis bank to the next.

Equity Acquired

This is determined by the down payment you make when acquiring a mortgage. If the total value of your property is $500,000 and your mortgage covers $400,000, the equity you own on that property is $100,000. This represents the down payment you made. As the years go by, your equity will increase since the amount of money that goes directly to the house payment, not the interest, adds to your total equity.

Mortgage Loan Repayment Period

The mortgage loan repayment period, also known as amortization, is the length of time you take to pay back your mortgage. This period is usually between 25-30 years.

Mortgage Term

The total time that your Indianapolis mortgage agreement is in action is referred to as the mortgage term. The normal mortgage term is usually five years. At the expiry of each term, you can negotiate new terms of the mortgage in terms of interest rates and repayments if you so wish.

Open and Closed Mortgage

With an open mortgage, it is possible to pay back a bit of your loan or the whole amount at any time. With a closed type of mortgage, the interest rates charged are lower but the prepayment options are fixed to a certain amount.

Method of Payment

The payment of a mortgage is done monthly or bi-weekly and is usually sent to the lender with pre-authorized payments directly from a bank account.

These are some of the common terms you will come across when dealing with an Indianapolis mortgage loan.