Loan Balance

Loan Balance

The loan balance refers to the remaining amount you owe on your mortgage principal. It is determined by calculating the difference between the original mortgage amount and the total amount of principal payments you have made.

Understanding your loan balance is crucial for effective financial management. It helps you keep track of your payments and informs decisions about making prepayments. There are useful online tools, such as amortization calculators, that allow you to determine your monthly payments and how many payments you have left until the loan is fully paid off.

In some cases, the loan balance may not be fully paid by the end of the loan term. This situation can occur with loans that include a “balloon payment,” where the loan does not fully amortize over the life of the loan, requiring a large payment at the end.

Conversely, you can pay off your loan balance early by making extra payments toward the principal. This strategy can reduce the overall amount of interest you pay over the life of the loan, helping you achieve debt freedom more quickly. Understanding your loan balance empowers you to make informed decisions about your mortgage and overall financial strategy.

Pre-Approval

Getting pre-approved boosts your credibility as a buyer since a lender certifies you’re likely to qualify for a mortgage based on a preliminary review.

Balloon Payment

Balloon loans involve regular monthly payments, but a large lump sum is due at the end of the term. That final payment is much bigger than the monthly ones.

Escrow

Your escrow account is set up by your lender to collect funds for property taxes and home insurance, making it easier to manage these payments.

PMI

With conventional loans, you must pay for Private Mortgage Insurance (PMI). Lenders require it to protect against losses if a borrower defaults.

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