2 Things You Never Knew About Your Mortgage

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Banks love nothing more than to confuse you with their jargon and confusing practices. To help combat that we’re helping to educate you on the two things that you never knew about your mortgage.

It’s Paid In Arrears

Mortgages don’t work the same way that paying rent does. When you pay your rent you’re usually paying for the month that you’re about to live in it. This means that if you pay your rent in June, you’re paying your landlord for the ability to stay there in June. The big difference with your mortgage is that is paid in arrears, which means that you are paying for the prior month. This means that when you pay your June mortgage payment, you’re actually paying for the time you lived in your Wilmington NC home in May.

Your House Is Not Your Asset

Don’t hate the messenger, but the message is very clear. Your house is absolutely not your asset. The house is simply the collateral that the bank uses to secure the amount of money that they let you. If they lend you $100,000 to buy a house, they want to make sure that they’re going to get that $100,000 back with interest. If you don’t pay, they can take the house back and sell it to get their money back. Your asset is actually the amount of equity that you have on the property. This can be calculated by taking the price your house would sell for and subtracting the balance of your mortgage.

These are two things that most people never learn about their mortgage. You would think banks would be more upfront about this kind of thing, but that would take away their market advantage, so why would they?

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