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Mortgage Interest

Nothing in this life is really free it seems, and this is especially true when it comes to your mortgage.  In order for lenders to make money on the lending that they do, they must acquire interest from their borrowers in order to make money and pay their overhead.  The mortgage interest that you have to pay is determined on a few things such as your interest rate and repayment terms.  Let's go over a few things that can affect the mortgage interest on the loan that you are currently paying. 

Mortgage interest can either be at a fixed rate, or it can be adjustable depending on the type of loan product that you ended up choosing. This interest is calculated on the term of the loan.  For example, if you have a 30 year fixed mortgage, the interest amount will be amortized over the 30 year period, making mortgage loan money relatively cheap.  Mortgage interest can be changed as people take advantage of mortgage refinancing, and getting a mortgage refinance on a bad credit mortgage product.  

By refinancing, you are essentially taking the current principle amount and stretching it back out to a 30 year term.  While this doesn't lower the overall amount of interest you will pay over the life of the loan, it can lower your payments.  The only way that a mortgage refinance can actually lower your interest is by speeding up the term.  For example, if you refinance a 20 year mortgage to a 15 year mortgage, that will lessen the amount of interest that you will pay as you will be able to pay down the loan faster. 

The truth is that because mortgage interest is spread out, most of the interest gets paid at the beginning and the end of the loan.  This means that the principle amount of your mortgage will not even really start being paid down until a few years into your mortgage loan repayment.  One thing that many people do in order to lessen the overall interest amount is that they make an extra mortgage payment each year on the principle amount.  This can help a 30 year mortgage to be paid 5 to 7 years early.  By doing this type of a thing, a borrower can reduce the amount of overall interest that they will pay on the amortized mortgage loan over the life of the loan.  As you can see, mortgage interest is a necessary part of getting a home loan, but there are some things that you can do in order to lower it. 


  10 Steps to Home Ownership:

Step 1: Are You Ready?

Step 2: Hire a Realtor

Step 3: Get Loan Pre-approval

Step 4: Search for Homes

Step 5: Choose a Home

Step 6: Obtain a mortgage

Step 7: Make an Offer

Step 8: Insure Your Home

Step 9: Close the Deal

Step 10: Avoid Foreclosure


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