What is APR?

APR is also referred to as the annual percentage rate. It is a figure used to disclose the cost of credit. It is the yearly amount a borrower must pay for getting a loan or other type of consumer credit. By law, lenders are required to disclose this number to consumers. The function of the APR is to allow consumers to compare the costs of financing from different financial institutions. The APR makes it more difficult for banks and lenders to hide fees.

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What is Amortization?

A mortgage loan that is amortized has a fixed payment over a fixed period of years. Each payment has a portion of the payment going towards interest and principal. The longer the loan goes the higher the amount of the payment goes towards principal and a lower amount is charged to interest. Most of the interest paid on an amortized loan is paid in the beginning of the loan. In fact on a 30 year loan you don't even own half of your home until the 24th year. Your best bet is to pay as much as you can in the beginning of the mortgage to save yourself thousands of dollars.

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What is a balloon payment for a mortgage?

A balloon payment would be the amount of money that is due at the end of a loan. Not all loans are 30 years. Some mortgage loans allow you to pay a lower payment for a short period of years with a balance that is due at the end. Typically these types of mortgage loans are 5 to 7 years in length. They differ from adjustable loans in that and adjustable loan will have a rate adjustment at the end of the fixed period versus have the entire balance due like on a balloon payment mortgage.

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