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Crucial Terms That Every First Time Home Buyer Should Understand

Not all first time home buyers will be familiar with the various terms contained in a mortgage agreement. These agreements are usually large documents that can be up to twenty pages in length and contains language that is more formal and legal-based. It is therefore recommended that persons who are unfamiliar with a mortgage agreement should brief themselves of the jargon that is commonly used, whether by way of professional assistance such as through Denver Property Management Companies or through individual research.

Honeymoon Rate
This term refers to a lower interest rate that some lending institutions will offer in an effort to attract borrowers. This interest rate is usually offered for a specified period of time, usually twelve months. After this time the lending institution will increase the interest rate. Home buyers should be cautious because the increased interest rate is usually much higher than the average rate.

Comparison Rate
In a mortgage agreement, the comparison rate is a reflection of what the true cost of the loan would usually be to borrowers. This rate includes the current interest rate being charged to the borrower as well as any other charges that are related to the loan. All these various figures are then calculated to give a single percentage that is based on several factors such as the repayment frequency and the term of the loan.

Offset Account
This account is used to reduce the interest costs on a loan. This is done by offsetting the loan through the linking of the mortgage account to the customer’s personal account. The balance in this account will then reduce the loan principal on the mortgage.