When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes. Here’s what you need to know about the differences between these two forms and what each means for you:
Understanding Fully Amortizing Mortgages in KC
Before you decide on what type of loan you are going to use for your new home, you may come across “fully amortizing” mortgages in KC. Fully amortizing mortgages cover a wide range of loan types.
The Payment Schedule of a Fully Amortizing Mortgage
A mortgage amortization schedule determines when a mortgage will be paid in full. Therefore, fully amortizing mortgages in KC have scheduled installments that fully pay both principal and interest over the life of the loan. Homeowners are required to pay these installments each month to ensure the remaining balance is paid by the end of the loan’s term.
Lenders sometimes offer loan programs that are not fully amortizing to make owning a home more affordable to borrowers with less income. For instance, interest-only mortgages in KC are not fully amortizing because they only require interest payments each month. These loans allow the borrower the flexibility to pay only interest or pay down the loan’s principal depending on what they can afford each month.
Fixed Rate Mortgages: Shorter Amortizing
A fixed-rate mortgage fully amortizes, or “is fully paid off” at the end of its term. For a 15-year fixed-rate mortgage, the loan is paid in full at the end of 15 years. If payments are made on schedule, a 30-year fixed-rate mortgage will be paid in full at the end of 30 years. Home mortgages in KC with shorter terms have less interest to pay because they amortize over a shorter period of time.
Adjustable Rate Mortgages: Longer Amortizing
Adjustable-rate mortgages in KC fully amortize even with a fluctuating interest rate. A 15-year adjustable-rate mortgage will still be paid in full at the end of the 15-year term if payments have been made regularly. The loan will still amortize regardless of whether or not interest rates have risen and fallen throughout the term.