What you need to know
If you don’t know what type of mortgage you have, you’re not alone. A 2008 poll commissioned by Bankrate revealed that 26 percent of American homeowners have no idea what kind of mortgage they have.
This is understandable, considering the vast array of different loans on the market and the myriad places consumers can now turn to procure loans.
However, it’s crucial to know the terms and conditions of your mortgage.
Some loans, such as adjustable-rate mortgages, or ARMs, have interest rates and monthly payments that move up and down with market interest rates.
If you have an ARM, it’s important to know when your rate is going to change and to prepare for potential higher monthly payments.
Take these steps to help understand your mortgage:
- Read through your mortgage documents. The conditions of your loan should be spelled out in the papers you signed at closing.
- If your mortgage documents are difficult to navigate, contact your loan servicer and ask for help.
Learning the details of your mortgage can also help you decide if refinancingwould be beneficial for you.
|1.||Fixed-rate. A mortgage with an interest rate that remains constant throughout the life of the loan.|
|2.||Adjustable-rate. A mortgage in which the interest rate and monthly payment change based on the current market.|
|3.||Subprime. A mortgage granted to a borrower with less-than-perfect credit. It is typically characterized by a higher interest rate.|