What is a 30 Year Mortgage?

Real Estate is what I do every day, all day. I work with people trying to make their dream of living in Hawaii a reality. Sometimes, as Realtors, we forget that people are not living and breathing this profession and we take for granted that everyone knows our language. It was brought to my attention the other day that not everyone understands what a mortgage is and what it means to them. So, what is a 30 year mortgage? Does it mean you have to live in that house for 30 years? Let’s hit the basics.

In the perfect world, we would all have the cash to buy our home and live happily ever after. For most of us, that isn’t a reality. Most of us need to borrow the money from a bank in order to make the purchase happen. This is where the mortgage comes in. A lender will give us the money to buy the house. The house is ours to do with what we want (within reason) and as long as we pay our mortgage payment, we eventually have the opportunity to pay the house off and own it free and clear. The house itself is the collateral for the loan and the lender has the right to foreclose on it, or take it back, if we don’t make our payments to them. The process of borrowing the money using your new home to secure the debt is called a mortgage.

What is a 30 year mortgage?

The most common time frame for a loan on a home is 30 years. This is usually amortized, meaning you will be paying a determined amount each month consisting of both interest and principle, which is the money that actually goes towards paying off the money borrowed on the house. At the end of 30 years, the interest and principle payments add up to the amount of the loan and the house is yours, free and clear.

Does this mean I am stuck with the house for 30 years?

What if my family grows or my needs change? That is a huge responsibility to try and determine my next 30 years right now. Luckily, you can sell your house at any time throughout the 30 years and move on to purchase another that fits your new needs. You will put your house on the market. At the end of the escrow, the Title company will have the funds from the sale pay off your first mortgage and the rest will come to you. You can then move on to purchasing your next home. So, even though the mortgage says you are in it for 30 years, you have the freedom to sell and move when your needs change. I hope this helps! Aloha!

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