A mortgage is a loan given to an individual by the bank or a mortgage lender which serves the purpose of aiding the individual in purchasing a home/ house. Therefore, the house you purchase simply acts as collateral in exchange for the money you are borrowing to finance the mortgage for your home. A mortgage is composed of four (4) major components: principal, interest, taxes and insurance. There also are different types of mortgages which include: fixed rate mortgage and adjustable rate mortgage.
A fixed rate mortgage has an interest rate that remains the same for the entire term of the loan. That means monthly payments will generally be the same as well. Fixed rate mortgages are great for anyone who plans to stay in their home for a long time, wants a reliable mortgage payment or has a strict budget to follow.
An adjustable rate mortgage (ARM) has an interest rate that is fixed for the first few years, then changes after the introductory fixed period. ARMs follow a specific market or index that determines the adjustable rate. Though the intro rate is usually quite low, an ARM interest rate has the potential to either increase or decrease when it adjusts, and there is less predictability for the borrower in terms of payments.
The length of your loan will also impact how much you ultimately pay for your home. Generally, extending the length of your loan will also increase the rate slightly. It will also cause you to pay more in interest overall since the longer your loan, the more interest payments you make.
For individuals who desire to obtain a mortgage, you are required to go into a mortgage broker and discuss a potential mortgage plan. However, in choosing your mortgage provider, ensure that you explore all possible options and then decide which policy terms best suit you. In Jamaica, there is First Caribbean Building Society, Jamaica National Building Society, Scotia Building Society, Victoria Mutual Building Society, First Mortgage Brokers and the National Housing Trust.
Be sure to choose a mortgage deal that is right for you!