TYPES OF MORTGAGES
Fixed: A fixed term (for example, 15 or 30 years) as well as a fixed interest rate. The interest rate and term are fixed at the start of the mortgage. The monthly amount for the payment of principal and interest will not change during the term of the mortgage.
Adjustable: Often referred to as an ARM (Adjustable Rate Mortgage). The interest rate on your mortgage will be adjusted up or down according to current interest rate levels. The monthly amount for your principal and interest payment will go up or down with these rate changes. These mortgages may include "Interest Only" type of loans.
WHAT DOES A MORTGAGE PAYMENT CONSIST OF?
Principal: The repayment of the original amount borrowed on a monthly basis.
Interest: The cost of borrowing the principal amount, repaid on a monthly basis.
Taxes: Real Estate taxes paid to a local government agency.
Insurance: Homeowners insurance on the home. Also any mortgage insurance, which is paid to protect the mortgage company.
The total of these items is known as the PITI (Principal, Interest, Taxes, Insurance) payment.