Mortgage Term and a Healthy Mortgage
Every mortgage is different. There are a lot of moving parts. It’s important to put all those parts into the right place by the time your mortgage is signed and delivered so you’re comfortable with your payments as well as the term of your mortgage.
So, how does the term of your mortgage affect you?
First of all, the mortgage term simply refers to the length of time you agree to abide by the terms of the contract with the lender.
For example, when you and the lender agree to a 5-year mortgage term, you’re agreeing to make your mortgage and tax payments on time, while the lender is agreeing to maintain the level of payment required both toward the principal and toward the interest on the property.
What happens if you break that agreement because you need to sell before the term is up?
Usually this results in a penalty calculated by the amount of interest owing over the remainder of the term or the interest rate differential. The important key if you need to break your contract is to fully understand the consequences before you purchase the property.
The term of your mortgage contract is an important step. Make sure you’re comfortable with the term and you won’t have to think about it.
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