Mortgage Broker Training

A mortgage is an agreement between you and a lender. It is an official agreement that states how much money you will borrow, how you will repay the borrowed amount, and when you will pay the loan back. Mortgage interest rates are what the lender will charge you for borrowing the funds. This is the most important factor in choosing a mortgage. It is also the factor that most borrowers and homeowners focus most of their attention on when shopping around for a home or refinance.

Part of every monthly mortgage payment is going toward paying off the interest on your loan, while the other part is going toward paying down the loan balance (also called your mortgage loan s balance). Mortgage amortization refers to the way these payments are split over the years of the mortgage. The longer the time frame you have to pay your mortgage, the more your monthly fee will increase. Conversely, the shorter your time frame, the more your interest rate will decrease and your monthly payment will decrease.

As mentioned above, the amount of time that your mortgage goes toward paying off is based on how long your mortgage goes before it is paid off. A mortgage with a longer time frame will pay off sooner, thus saving you some money. Conversely, a shorter time frame means paying off more in interest. So, to truly understand how your mortgage payments will work, it is important to talk to your mortgage lender and obtain their recommended amortization schedule for your area.

Many homeowners who are shopping around for new homes and refinance understand that their monthly payment will be affected by the interest rate they choose. However, many fail to realize that their mortgage lender will also play an important role. Most lenders offer fixed-rate mortgages that are tied to a certain index, usually the prime rate. If the prime rate moves downward, so does your interest rate, thereby increasing your monthly payment.

Mortgage lenders calculate their loan principal using two different methods: the amortization method and the compound amortization method. In the amortization method, the monthly mortgage payment is determined by the amount of your mortgage principal borrowed and divided by the amount of your loan principal each month. The compound amortization method uses the formula: principal * interest paid or amount borrowed multiplied by the amount of time your principal is paid off.

The federal Truth in Lending Act requires mortgage lenders to disclose certain information about their interest rates, such as the APRs, the Annual Percentage Rate, the Term Value of Interest, and the Mortgage Insurance Premium. Mortgage lenders must also disclose any negative amortizations and potential negative credit factors. Mortgage borrowers should learn as much as possible about these fees and terms before they commit to a loan with a particular lender.