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Mortgage Strategy: Everything You Need to Know

From the moment you take out a mortgage, you are committing to a long-term loan, which means long-term planning. A mortgage strategy can help you find a loan that fits your needs and your budget. Employing a mortgage strategy with the right provider can make ownership a joy and not overwhelming.

The First Steps in Your Mortgage Strategy

To lay the foundation of your mortgage strategy, you need a step by step mortgage guide. The first steps are to learn what mortgages are and how they work.

What Is a Mortgage?

A mortgage is made up of two main parts:

  • The principal
  • The interest on your loan

Your principal is your loan amount. Your interest is a percentage of the principal. The lender charges you interest for the privilege of borrowing money to be repaid over time. Your mortgage payment is a monthly installment that includes an amount towards the principal and the interest.

Calculating this monthly payment is based on the terms of your loan. This calculation is the principal plus interest according to your interest rate. The mortgage rate is the annual percentage rate (APR) that is assessed for the total cost of your loan. The APR includes both the interest rate and loan fees. Another rate you should become familiar with is annual percentage yield (APY). APY is important to understand to gauge the actual annual costs on the compounding interest of your mortgage.

This calculation helps you see if you can afford the loan or not. You need to figure out if it fits your budget. Is it a payment you can manage over the long term? These are essential questions for you to answer as you move through your mortgage strategy.

Types of Mortgages