One of the first things that a first time buyer should do
February 22nd, 2012 . by adminOne of the first things that a first time buyer should do is familiarize their selves with the term APR. The term APR gets tossed around a lot and most banks do not define what these three letters mean when they advertise mortgages in the USA or mortgages in the USA for Canadians on television or in print. The term APR stands for, “annual percentage rate”, and the term refers to the fact that bank loans accumulate interest on an annual or “yearly” basis.Newbie’s need to realize that mortgages in the USA have two built in charges that create their monthly payment rate. The actual amount of money from each payment that is being applied to the amount of money being borrowed is often times referred to as the “principle” because this is the principle amount of the loan. Interest is figured into each payment because the bank has to earn money as they are lending it.Not all of each monthly house payment is going to be applied directly to principle as interest has to be accommodated for. Some of the payment will go toward principle and some of it is allocated to interest for that particular month. There are many methods for a bank to determine how much of the payment goes to each section however the amortization schedule is among the most common.An amortization schedule breaks down each monthly payment for the life of the loan and allows the bank and home owner to see how much of each payment goes toward principle and how much of it goes toward interest. During the beginning, more money will go toward interest. As the home owner decreases the amount of principle, less loan money is accumulating interest and therefore interest will be less.
