So you've decided to make the first big step to becoming a homeowner. Good for you! There are, however, a few things you should know. Chances are unless you're very wealthy you're probably going to need a home loan and mortgage. The good news is that over time you will gain equity and build your score. So here are some helpful terms for you to know.
1. Variable Rate Mortgage
Just as it sounds, a variable mortgage is one that's rate changes throughout its term. The rates can go up and down at any time. They are generally greater than or less than the prime rate, and change whenever the prime is adjusted.
2. Open Mortgage
This is a mortgage that you can pay off whenever you want with no penalties or consequences. That literally means you could pay it all off right now or just pay down a large chunk of it and repeat as you go.
3. Closed Mortgage
A closed Mortgage is a mortgage you must pay within the determined time frame. If you pay early you face penalties and fees that it less than worth your while. The plus is your rates will be much lower than those in an open mortgage.
4. Fixed Mortgage
In a fixed mortgage, your rate will stay the same and never change no matter what. That means your rates won't go up and at all for the duration of your choosing.
5. Mortgage Disability Insurance
This is special insurance you can buy to go along with your mortgage, usually adding a little extra to your monthly payments. If you become injured at work or otherwise disabled and out of the job the insurance will cover your payments up to a given amount of time.
6. Mortgage Renewal
At the end of a term usually agreed to by you the buyer, your mortgage will expire. This is the time to renew and it allows you to set new mortgage terms if your needs or wants have changed.
7. Mortgage Default Insurance
If you are unable to pay your mortgage for any reason other than disability this insurance will protect you from defaulting. Your payments will be covered for the defined term no matter what whether you're unemployed or for any other reason. This is a required buy when you put less than 20% down on a home.