How do I: Understand my mortgage?

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Topic: Mortgage
Who is affected: Homeownership
What you’ll need: Mortgage documents

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.

Refinancing your mortgage could help you get a lower interest rate or tap home equity. Enter your information into the following boxes and click “Go” to find out what refinancing could do for you.
Current monthly payment:
Current interest rate:
Balance left on mortgage:
New interest rate:

It’s good to be familiar with these three types of loans:
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.