Definition of 'First Mortgage'
First mortgages are typically offered by banks and other financial institutions. The interest rate on a first mortgage is usually lower than the interest rate on a second mortgage or a home equity loan. This is because first mortgages are considered to be a safer investment for lenders.
The down payment on a first mortgage is typically 20% of the purchase price of the property. However, some lenders may offer loans with a lower down payment, such as 10% or 5%. The amount of the down payment will affect the interest rate on the loan.
The term of a first mortgage is typically 15 or 30 years. However, some lenders may offer loans with shorter or longer terms. The length of the term will affect the monthly payment on the loan.
The monthly payment on a first mortgage includes principal and interest. The principal is the amount of money that is borrowed. The interest is the fee that the borrower pays to the lender for borrowing the money. The monthly payment will remain the same for the entire term of the loan, unless the borrower makes extra payments.
There are several advantages to getting a first mortgage. First, the interest rate on a first mortgage is usually lower than the interest rate on other types of loans. Second, the down payment is typically lower than the down payment on other types of loans. Third, the term of a first mortgage is typically longer than the term of other types of loans.
There are also some disadvantages to getting a first mortgage. First, the monthly payment on a first mortgage is usually higher than the monthly payment on other types of loans. Second, the borrower is obligated to make payments on the loan for a long period of time. Third, if the borrower defaults on the loan, the lender can foreclose on the property and sell it to recoup their losses.
Before getting a first mortgage, it is important to compare interest rates from different lenders. It is also important to consider the down payment, the term of the loan, and the monthly payment. The borrower should also make sure that they can afford the monthly payments before they sign the loan documents.
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