Want to learn about mortgage loans in NC from AmeriSouth Mortgage Company? If so, you’re in the right place. A mortgage is a kind of loan we offer that a person can use to finance the purchase of a home. A mortgage is different than other loan types, like personal or student loans, since your house can be used as collateral with a mortgage loan. To better understand mortgage loans in NC let’s consider the story of Mark and Lisa.
Mark and Lisa Need Help Financing their New Home
Mark and Lisa are newlyweds looking to buy their new home. After a lot of searching, Mark and Lisa find the perfect home with a not-so-perfect price tag of $500,000 – more than the amount they have in the bank. What are they to do? Mark and Lisa head over to the AmeriSouth Mortgage Company and we suggest that they take out a mortgage to buy the new home.
Understanding the Terms of a Mortgage
Mark and Lisa have been saving for a while and decide to put down $100,000. This means Mark and Lisa will need to borrow an additional $400,000 to buy the house. AmeriSouth reviews Mark and Lisa’s credit report and income statements and grants them a $400,000 loan at a fixed rate of 5% with a 5-year term and a 40-year amortization period. This means that Mark and Lisa must pay a 5% interest rate to the bank per year. The fixed 5-year term means that Mark and Lisa are locked into this rate for 5 years, regardless of whether the interest rates go up or down.
Conversely, they could have taken a variable or floating rate which goes up and down with the interest rates. Fixed rates are often the safer choice but are usually a little more expensive than the variable rates. Finally, the amortization period is the amount of time Mark and Lisa will take to pay off their loan and own their home entirely. With monthly interest and principle payments, Mark and Lisa will be the sole owners of their home in 40 years.
Is a Mortgage Worthwhile?
The benefits of taking a mortgage should be pretty clear. For one thing, you won’t be putting money into a landlord’s pocket anymore. Each time you make a mortgage payment, you’ll own a little bit more of your home. Currently, the house is split between equity (what Mark and Lisa own) and debt (what the lender owns). Every time Mark and Lisa make a payment, they turn some of their debt into equity. Also, Mark and Lisa could make a nice profit if the value of their home appreciates.
Selling a House with a Mortgage
For example, imagine Mark and Lisa get an offer to sell their home for $600,000 the day after they bought it. Mark and Lisa and the bank aren’t partners. They don’t have to split the profits. Mark and Lisa take the offer and sell the house. They collect $600,000 from the buyer and pay back the $400,000 loan to the bank. Just like that, they’ve doubled their $100,000 investment. To learn more about mortgage loans in NC or other personal finance topics, contact AmeriSouth Mortgage Company.