A mortgage is a legal agreement by a bank or other financial institution and a debtor. The financial institution lends money with interest and takes ownership of the property if the debtor defaults. This is a type of secured debt.
Why It's Important
Most people that purchase homes, have to get a mortgage to afford it. In my opinion, mortgages are a form of "good debt" although cash is always king! There are different types of mortgages a borrower can get. For instance, a borrower can get a 30-year conventional loan with a variable interest rate or a 30-year FHA loan with a fixed interest rate. There are many combinations these loans can come in and your best defense is to learn as much as you can before using one to purchase a home. Some of these terms will be covered in the upcoming Wednesday Words of the Week.
Personally, I have a 30-year FHA loan with a fixed Interest rate of 4.25%. I would like to refinance at a later date to a conventional loan so I can rent it out and get rid of having to pay private mortgage insurance. If your head is swimming with these terms, don't worry! That just means you have more education to do and I am here to help!
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