What you need to know about Utah mortgage loans

So you think you’re ready to get a mortgage to buy your first house or your dream home? There are some things you need to know about Utah mortgage loans first.

Although the process of buying a home—including obtaining Utah mortgage loans—can seem complex, the team at First Utah Bank is dedicated to demystifying Utah mortgage loans so homeowners can make the best purchasing decisions possible.

Down payment

This is the amount of the purchase price you need to have in cash. A down payment is typically 5 to 10 percent of the purchase price, but you might qualify for a 0 percent down payment. Ask your First Utah Bank mortgage representative for more information.

When you make an offer to buy a house, you need to provide a deposit. This counts toward your down payment. The greater the down payment, the lower the monthly payment on Utah mortgage loans will be, and the less homebuyers will pay in overall interest.

Interest and principal

The principal is the total amount of money you borrow. You will pay this amount back, plus interest, to the lender. Each payment includes some interest and some principal. The first payments will be almost all interest. As time goes on, more and more of each payment will go toward the principal.

Remember your monthly mortgage payments do not cover all the costs of home ownership. You will also need to pay for insurance, property taxes, utilities, maintenance and upgrades, and much more. Keep this in mind when you are working out how large a monthly mortgage you can afford. Create a budget that accounts for all of the expenses you might face in a given period of time.

Open and closed Utah mortgage loans

The main difference between open and closed mortgages is that open mortgages allow you to pay off the remaining principal at any time, while closed mortgages follow a strict repayment schedule. Some closed mortgages allow some prepayment options, which allow you to pay off a set portion of the principal faster. By contrast, a closed mortgage generally will charge you penalties for paying off the balance before the scheduled end of the mortgage’s lifespan.

Usually, closed mortgages offer a slightly lower interest rate than open mortgages with the same term and amortization period.

Mortgage term and amortization period

A mortgage term refers to the time your mortgage agreement with your lender will be in effect—for example, 15 years. At the end of this period, the borrower must either pay off the principal or renew his or her Utah mortgage loans.

The amortization period is the length of time it will take to pay off the principal. The longer the amortization period, the lower your monthly payments will be. However, you will pay more in total interest costs. Therefore, you are better off if you can pay off your mortgage as quickly as possible.

Fixed rates, variable rates and payments

Fixed interest rates remain the same throughout the term of Utah mortgage loans. Variable rates rise or fall with market interest rates.

With variable rates, your payments can also be fixed or variable. If you have fixed monthly payments and the rate goes down, more of your payment will go toward paying off the principal. With variable payments, when rates go up, your monthly payments will increase.

Payment frequency

Although most mortgages are repaid monthly, switching to biweekly payments means you will make 26 payments per year instead of 12. This can reduce your overall interest costs over time. Ask your mortgage manager for more information.

Mortgage loans are available with many different options and variables. Contact a First Utah Bank mortgage specialist for more information.