e, however we need to talk about a few other terms to put it into perspective. First is principal, which is the amount of money you owe on your home loan. If you take out a loan for $300,000, that is your principal. Second is balance, which is the amount you owe at anDid you know that there are two distinct parts to your home mortgage loan, principal and interest? Did you also know that if you don’t closely watch both parts you could lose your house? Not to worry though, for home buyers with a fixed rate loan the monitoring of these two parts is done for you. However, for those who got trapped into adjustable rate loans, or low interest starter loans, you better be prepared to watch those two parts very closely. If you are shopping for a loan, be very leery of those sweet looking loans with low monthly payments. Those are the ones you have to watch. In the last article we briefly discussed amortization and negative amortization, and how potentially dangerous negative amortization can be. In this article we will talk about amortization, and do a little math to illustrate what it is. The reason to look closer at this issue is that amortization is what we call the two parts of a loan. This may sound a harsh, but many people lose their homes because of negative amortization.

The definition of amortization really quite simple, however we need to talk about a few other terms to put it into perspective. First is principal, which is the amount of money you owe on your home loan. If you take out a loan for $300,000, that is your principal. Second is balance, which is the amount you owe at any

e two parts is done for you. However, for those who got trapped into adjustable rate loans, or low interest starter loans, you better be prepared to watch those two parts very closely. If you are shopping for a loan, be very leery of those sweet looking loans with low monthly payments. Those are the ones you have to watch. In the last article we briefly discussed amortization and negative amortization, and how potentially dangerous negative amortization can be. In this article we will talk about amortization, and do a little math to illustrate what it is. The reason to look closer at this issue is that amortization is what we call the two parts of a loan. This may sound a harsh, but many people lose their homes because of negative amortization.

The definition of amortization really quite simple, however we need to talk about a few other terms to put it into perspective. First is principal, which is the amount of money you owe on your home loan. If you take out a loan for $300,000, that is your principal. Second is balance, which is the amount you owe at an

nthly payments. Those are the ones you have to watch. In the last article we briefly discussed amortization and negative amortization, and how potentially dangerous negative amortization can be. In this article we will talk about amortization, and do a little math to illustrate what it is. The reason to look closer at this issue is that amortization is what we call the two parts of a loan. This may sound a harsh, but many people lose their homes because of negative amortization.

The definition of amortization really quite simple, however we need to talk about a few other terms to put it into perspective. First is principal, which is the amount of money you owe on your home loan. If you take out a loan for $300,000, that is your principal. Second is balance, which is the amount you owe at an

llustrate what it is. The reason to look closer at this issue is that amortization is what we call the two parts of a loan. This may sound a harsh, but many people lose their homes because of negative amortization.

The definition of amortization really quite simple, however we need to talk about a few other terms to put it into perspective. First is principal, which is the amount of money you owe on your home loan. If you take out a loan for $300,000, that is your principal. Second is balance, which is the amount you owe at an

e, however we need to talk about a few other terms to put it into perspective. First is principal, which is the amount of money you owe on your home loan. If you take out a loan for $300,000, that is your principal. Second is balance, which is the amount you owe at any one time on your loan principal. Third is interest, which is the cost you pay for borrowing the money from a bank for your house. Understanding that principal and interest are two different things is a powerful piece of knowledge that is very helpful when shopping for the right home loan.

Okay, let’s talk about the two parts. The monthly payment of loan on a mortgage is divided up between the interest due and the principal. So, what happens is, when you make a payment the money goes to the loan servicing company. The servicing company applies portions to both the interest and the balance. This process guarantees that if your thirty year loan is fully amortized, you will pay off your loan, both principal and interest, in thirty years. The system is simple in function, but is complex in calculation.

Here is a quick, and hopefully painless, look at those calculations, just so you have an idea of what people are talking about when the subject comes up. Let’s say that John and Joan Jackson take out a loan to purchase their new home. When their loan is funde