As you search for your home loan, you’ll want to know the basic terminology that applies to the home lending industry. Let’s discuss some of the basic terms and concepts related to mortgages.
What is a Mortgage?
A mortgage is a loan you obtain to pay for a home and any land it sits on. The home and land is used for collateral on the loan, which means that if you don’t make your payments, the lender can take the home away to cover your missed payments. Most mortgages last 10 to 30 years but can be paid off sooner.
Principal and interest (PI) together comprise most of your mortgage payment.
The loan principal is the amount you actually borrow to purchase the home. Your initial principal is reduced by the amount you put towards the homes down payment.