What is a Mortgage and How Does it Work?

If you’re a first-time homebuyer, you might be wondering what a mortgage is and how it works. Believe it or not, mortgages didn’t exist before the 1930’s. In fact, if you wanted to buy a home, you needed enough cash in your pocket (or in the bank) to purchase the house of your dreams. But now real estate is different. And thanks to mortgages, families can reach the American dream of having a place to call home. So if you’re looking to buy your own place with a little help of what we call a mortgage, here’s what you’ll need to know:

What is a mortgage? A mortgage is essentially a loan where the bank or mortgage lender loans you a chunk of money, which you must pay back over a period of time.

How does it work? For quite some time, the only mortgage available was known as a fixed-interest rate loan, which was repaid over 30 years. This type of loan offers the opportunity to pay stable and relatively low monthly payments. However, in the 1980s, ARMs (adjustable rate mortgages) became available, allowing you to pay even lower initial interest rates that ‘reset’ each year.

What happens if I don’t pay back my loan? If you fail to pay back your loan, the lender has authority to take your home. This process is known as foreclosure. A few years back, many foreclosures occurred because lenders began offering ‘creative’ ARMs with even shorter reset periods, allowing unqualified borrowers to believe they could afford to pay off the loan.

So if there is anything to be learned from these experiences, it’s that you should be aware of your finances and what a mortgage entails. To learn more about how mortgages work, click here.

If you’ve talked it out with your family and the bank, and are ready to purchase your own home, why not check out Copper Square? We offer townhomes and duplexes you will love for years to come! Our Models, Design Studio & Sales Center are now open. Call today at (203)778-4800 or visit our website for more information.

10 Copper Square Drive, Bethel, CT 06801
(Off RT. 6, Stony Hill Road.)
For GPS location use 48 Stony Hill Road