Loretta Maimone
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Mount Dora Real Estate – Mortgage Basics

Fri, Nov 08, 2013 at 10:20AM

A home mortgage is probably the largest single investment you’ll every make. A mortgage is a loan used to finance the purchase of your new Mount Dora or Lake County area home, and they are usually structured for repayment over 15 to 30 years. Your home becomes collateral for your loan, and as long as you make your monthly payments you’ll have a lifetime of comfortable shelter.

There are four typical aspects of a home loan payment; principal, interest, taxes and insurance.

Principal - The principal is actual amount of funds you need to borrow to buy your home. The principal is almost always reduced with a down payment.

Interest - Interest is what the lender charges you for the use of their money, and it is usually expressed as a percentage called the interest rate.

Principal and interest represent the bulk of your monthly mortgage payments. Most loans are structured with a process called amortization, which reduces your principle balance according to a specific schedule over the course of your loan. With amortization, your monthly payments are weighted to pay mainly interest early on and then more and more principle as time goes on.
Your mortgage payment may also include money used to pay taxes and insurance. Usually it is deposited in a special account, called either a trust or escrow account, that is then paid out to insurance companies or that's deposited in an escrow or trust account to pay certain taxes and insurance.

Insurance – Typically a homeowners insurance policy is a requirement for your loan in order to protect the financing institution if your home were damage or destroyed. This would cover fires, flood, windstorms and many other hazards. Sometimes specific additional riders are required, like hurricane insurance in Florida. Also, if you have a small down payment (less than 20%) and high principal, you may be required to have a mortgage insurance policy that protects your lender in case you default on the payments.

Taxes – The taxes due with your mortgage are property taxes your community levies based on a specific percentage of the value of your home. These taxes are used to help finance the cost of running your towns and cities for roads, schools and other needs. Property taxes must be paid even after your mortgage is paid off.


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Loretta Maimone
Loretta Maimone
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600 North Donnelly Street,
Mount Dora, FL 32757

(352) 357-2400

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(352) 357-2400

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