Getting Your First Mortgage? Here's 4 Elements of Mortgage Law You Should Know

When you decide to become a property owner, you need adequate financing for purchasing the property. Whether you have cash at hand or not, you can own your dream property with a mortgage.There are many lenders in the market today with different types of mortgages that can fit your needs. However, before applying for your first mortgage, you need to know the elements and understand the nitty-gritty of the mortgage. Here are the four elements.

Principal

A principal is an amount you borrow from your lender intending to finance your property. In most cases, lenders can finance within a range of 80% and 95% depending on the lender. You need to repay the money within the lender’s stated period.As you pay your monthly mortgage, the principal amount reduces. It is paid monthly until the mortgage term is over. It’s worth noting that the principal amount does not include the interest owed.

Interest

Once you borrow a mortgage, your lender will give you charges as compensation for giving you a mortgage. It is a certain percentage of the loan principal, and it can be three times above the principal’s total sum over the mortgage’s life.However, note that interest varies as per the amount borrowed, the lender, and the borrowing terms. For instance, if your loan is considered low risk, you’ll get a low-interest rate, unlike a high-risk loan.

Term

A mortgage term is a duration in which you’re expected to clear your loan. The lender expects you to abide by the loan conditions and as per the loan term. Over this time, you may need a mortgage lawyer to help you define the mortgage’s legal parameters.This is the time when the lender closely monitors the interest rate and pre-payment restrictions, and any default may lead to a repossession of your mortgage. The terms vary according to the type of mortgage.
Some can be as short as six months, while others can go over ten years. Once you clear your mortgage within the expected term, you can renew, refinance with the same lender, or you can decide to switch lenders.

Loan Repayments

Repaying is the process of paying back the mortgage regularly. Most loans are repaid monthly and cover the interest charges together with part of the principal amount. You can also choose to repay your loan in a lump sum. Lenders who have challenges repaying the loan can seek other repayment options.