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You will need to discuss the repayment
terms with your Lending Consultant or individual mortgage
company and select a loan that offers terms that best
suit your needs. For example, if you need to borrow
$20,000 to make repairs on your home, you may not want
a loan that requires you to repay the entire amount
in one or two years because the monthly payments may
be too high.
Be sure you understand how much your
monthly payments will be and what they cover. Your mortgage
company should be able to give you this information
in advance. With some loans, you will be required to
make monthly payments on the principal and interest.
With other loans, you may be required to pay interest
only on the borrowed amount. With these loans, your
monthly payments will not reduce the principal amount
of the loan. With such a loan, you will be required
to pay back the entire borrowed amount at the end of
the loan period. These loans are popularly known as
"balloon loans." If your loan has a balloon
payment, you should consider how you will arrange to
repay the entire amount when it becomes due.
On "home equity lines," the
mortgage company does not have to give you the exact
amount of the monthly payment, but must explain how
it is figured. This is because the borrowed amount will
vary and your outstanding balance will change if you
use the line of credit. However, if your monthly payment
term is 5% of the outstanding balance and your outstanding
balance is $5,000, your minimum monthly payments would
be $250.
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