If you’ve recently considered purchasing a new home and have looked at variate mortgage loan options, you’ve probably heard the terms, ‘principle’ and ‘interest’ already. While the two terms tend to follow one another, they’re far from the same. If you’re wondering what they mean and what the difference is, here’s a quick explanation…
The principal of the loan is the amount you will actually be borrowing for your home loan in order to make the purchase.
The interest of a loan is the percentage charged over time (typically added to each payment) and is based on the interest rate that was offered when the loan was made.
The time it’ll take to pay off the loan is known as it’s ‘term’. Most home mortgages have a term of 15-30 years.
Most of each month’s payment will be comprised of the principal payment and the interest. Each month, the interest and the payment will be collected and applied to the loan through a process called amortization. With amortization, your payments will mostly be put towards paying the interest early in the loan term. Later in the life of the loan, more of the payment will go towards the principle.
If you’re considering purchasing a home and are looking for loans in Joplin, MO, we’d love to talk with you. Contact our office and schedule your consultation with one of our premiere mortgage lenders today!