Buying a home is usually considered the number one investment an investor, or consumer will or should make in their lifetime. A home is a great investment for several reasons. First off, a home is an actual place that provides an actual service unlike stocks or other financial markets. Because a home is an actual place, it can provide comfort, security, consistency, protection, and an almost unlimited list of qualities. A home is also one of the best investments a homeowner will make because a home is an investment that historically has almost always appreciated in value over time. Even if prices remain stagnant, a home will have equity built into it and will be a reservoir of security.

Because a home is so expensive, only a small percentage of buyers will have the money up front to buy the home. In fact, almost no first time home buyers are ever able to buy their home up front. So in order to buy a home, a home owner must take out a loan. Because the loan will be so much more expensive than any other form of loan a bank or any other lender will ever give out, they have their own name, a mortgage. In Latin, mortgage means “commitment until death.” Although, a mortgage is not truly a commitment until death, the lender will use the home as collateral or take owner ship in the home until the home is paid off. Because of the large nature of the loan, almost all mortgages are in fifteen or thirty year payoff periods. The lender will expect the borrower to make all of their monthly payments until the loan is paid off in full.

The actual base amount that the loan is actually for is called the principle. So if a first time buyer buys a home for $100,000 and has 20% for a down payment, then the remaining principle on the loan will be $80,000. Since the interest is compounded monthly most of the early payments are actually a majority interest.

Mortgage interest is unique to most people because of how long it takes to pay down enough principle to actually be paying more principle than interest. Interest is the charge or fee a lender will effectively charge a borrower to use their money. The interest is a charge incurred over time as the loan is being paid down. A lender may also charge interest points. An interest point is paying up front exactly how much one interest point will make the lender over the course of the loan. So if a loan is for $100,000 then one interest point is going to be $1,000 dollars.

The last thing that must be taken into account when one takes out a mortgage or even owns a home is that the city or state will levy property taxes. All real estate owners are required to pay their taxes, and all people who take out a loan are required to pay insurance. Because it is hard to pay the usually steep taxes and the insurance in one payment, an escrow account will be set up where a third party manages it and collects much lower monthly payments and pays the lump sum at the right time.

Author Bio: Juhlin Youlien writes about AZ real estate including Paradise Valley AZ homes for sale, Fountain Hills AZ homes for sale, Mesa Real Estate and Scottsdale AZ homes for sale. Paradise Valley Homes are typically luxury homes.

Category: Real Estate
Keywords: homes, real estate, buying a home, selling a home, realtor, realtors, loan, mortgage, foreclosure, s