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The word "mortgage" has fascinating historical roots. It derives from the Old French term "mort gage", which translates to "dead pledge". In times of old, the pact of the mortgage was deemed "lifeless" upon fulfillment or borrower default, resulting in the forfeiture of property ownership.
The inaugural documented mortgage transaction within the United States harkens back to 1629 in Plymouth Colony, Massachusetts. The pioneering settlers, in their quest to secure funds for the construction of their abodes, employed the concept of the mortgage to obtain loans for their burgeoning settlements.
The contemporary landscape of mortgage interest rates stands in stark contrast to the challenging terrain faced by borrowers during the early 1980s. At its zenith in 1981, the prevailing average rate for a 30-year fixed mortgage surged to a staggering 18.45%. This serves as a poignant testament to the profound impact that economic variables can wield over the cost of borrowing.
While neophyte homebuyers are commonly acquainted with the concept of Private Mortgage Insurance (PMI), which is frequently mandated for down payments below the 20% threshold, it is worth noting that distinct variations like Lender's Mortgage Insurance (LMI) and Mortgage Indemnity Insurance (MII) exist in certain regions. These diverse titles are utilized to serve akin objectives, safeguarding lenders and borrowers alike.
While many understand that credit scores affect mortgage eligibility, few realize the extent of their influence. A difference of just a few points in your credit score can significantly impact the interest rate you qualify for, potentially costing or saving thousands of dollars over the life of your loan.
An intriguing strategy for paying off a mortgage faster involves making biweekly payments instead of monthly ones. By making half of your monthly payment every two weeks, you end up making 26 half-payments or 13 full payments in a year, effectively making one extra payment annually and reducing the loan term.
Escrow accounts are designed to protect both lenders and borrowers. These accounts hold funds for property taxes and homeowners' insurance, ensuring that these essential payments are made on time. Lenders often require escrow accounts for added security.
Some lenders offer the lesser-known option of mortgage recasting. This allows borrowers to make a substantial lump-sum payment toward their principal balance, reducing monthly payments without refinancing. It's a valuable tool for those who receive windfalls or bonuses.
While somewhat known, the intricacies of mortgage interest tax deductions can surprise buyers. The tax code allows eligible homeowners to deduct the interest paid on mortgage loans, potentially resulting in substantial tax savings.
Making additional payments toward your mortgage principal can significantly reduce the loan term and save on interest costs. Even small, regular extra payments can add up over time, accelerating the path to debt-free homeownership.
Note: The information provided in this article is for informational purposes only and should not be considered as financial or insurance advice. It's always advisable to consult with a professional financial, insurance advisor or agent for personalized guidance.
