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| What is a mortgage? | |
| Generally speaking, a mortgage is a loan obtained to purchase Albuquerque New Mexico real estate. The "mortgage" itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest. | |
| What is a loan-to-value (LTV) ratio? How does it determine the size of the loan? | |
| The LTV ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing. Each loan has a specific LTV limit. For example: with a 95% LTV loan on a home priced at $50,000, you could borrow up to $47,500 (95% of $50,000), and would have to pay $2,500 as a down payment. The LTV ratio reflects the amount of equity borrowers have in their homes. The higher the LTV ratio, the less cash homebuyers are required to pay out of their own funds. So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require a mortgage insurance policy. | |
| What types of loans are available and what are the advantages of each? | |
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| When do ARMs make sense? | |
| An ARM may make sense if you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren't concerned about potential increases in interest rates. | |
| What are the advantages of 15- and 30-year loan terms? | |
| 30-Year: In the first 23 years of the
loan, more interest is paid off than principal, meaning larger tax
deductions. As inflation and costs of living increase, mortgage payments
become a smaller part of overall expenses. 15-year: Loan is usually made at a lower interest rate. Equity is built faster because early payments pay more principal. |
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