by Jim Carson
Question by : whats a mortgage? and refinancing it?
dumb it down for me :]
Answer by chatsplas
You buy a home, you pay cash, you own it.
You don’t have enough $ $ to buy a home, so you put down some money and borrow the rest from a bank, and you pledge to them a security interest in the house. Thus if you’re a deadbeat and don’t pay them as you promised to, they can foreclose as they have ownership interest in home.
Interest rates for home mortgages were high when you bought (more than 10%), or you had bad credit and could only get a higher interest loan, and you have improved the situation, so you refinance. You pay off the first mortgage and get a new mortgage, hopefully at a lower interest rate, which translates into lower monthly payments.
The LESS you put down to buy home, the MORE you pay out, in interest over the life of the loan 2-10 times the purchase price. If you don’t put down 20%, you have to pay substantial extra costs of PMI.
The MORE you put down to buy home, the More likely you are to have mortgage approved, the less you pay for interest, and the LESS you pay for the home over the life of the loan in interest.
What do you think? Answer below!