The loan term is the time allowed to repay the mortgage. Common terms are 30 years and 15 years. Longer terms lower monthly payments but increase total interest.
Loan Term
Principal
The core amount of money you borrowed to purchase your home. Your principal balance decreases as you make monthly payments, building equity in your property over time.
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The Down Payment is the portion of the home price paid upfront. Higher Down Payment generally qualify for better rates and may avoid PMI, with 20% down commonly used as a benchmark.
Down Payment
Interest
The cost of borrowing money, calculated as a percentage of the principal. Early in your loan term, a larger portion of your monthly payment is dedicated to interest rather than principal.
Closing Costs
Closing Costs are fees paid upfront at closing to complete the transaction, including lender fees, appraisal, and title insurance. Closing costs typically range from 2-5% of the home price.
Amortization
The structured schedule that outlines how your loan will be paid off over time. It reveals how each installment impacts your debt, ensuring the balance reaches zero by the end of the term.