When you get a mortgage you will need to put a down payment on the purchase price of your home. This can range as low as 5% to 100%. If you don't put a 100% down you will have to finance the rest. This finance is called a mortgage.

Terms you need to know

When getting a mortgage you have probably heard the following terms. We will try to explain them in a simple manner.
 
Principal: This is the amount of the loan that you are financing.
 
Interest: Because you are borrowing money, then lending instutuition where you are borrowing the money charges you a fee. This fee is called interest.
 
Blended Payment: The payments that you make can be on a monthly, bi-weekly, weekly or what ever is convenient for you. These payments will go to the interest that you owe and the principal.
 
Term: when you get a mortgage you will need to choose a term where you want to pay a certain interest rate. This can typically range from 6 months to 10 years.
 
Amortization: This term refers to the amount of time you want to take to pay your mortgage. This can be different than your term. Your term is shorter to help you meet your budget. Typically the shorter the term the better interest rate. For example, you have your mortgage amortized over 25 years, but your term may only be 5 years. If your term is 5 years you would know what your mortgage payments were for 5 years. Because the interest rates change on an ongoing basis it is sometimes advantageous to have a short term mortgage, but if you can get a 5 year rate that you are comfortable with some people like the security of knowing what there mortgage payments are for a longer term.
 
Equity: The equity that you have in your home is the difference in what your house can sell for and the amount of your mortgage. For example, if you can sell your house for $150,000 and your mortgage is $100,000, you have $50,000 in equity. You can use this equity when trying to get another loan or refinancing your existing mortgage.