Mortgage Structure

Certain guidelines apply to the typical mortgage loan.

To begin, a down payment is normally required during the mortgage origination. The payment has traditionally 
been a fee equal to 10-30 percent of the total value of the home. However, in recent years, mortgage lenders 
have become more flexible with their requirements. Now, underwriters may offer a "low" or "no" down payment 
mortgage, and payments as low as 5-10 percent are quite common. It should be noted that if the down 
payment is below 20 percent, then the lender may require Private Mortgage Insurance (PMI).

The duration of the mortgage usually spans 10, 15, 20, or 30 years. The rate of payoff as well as the ratio of 
principal and interest paid are determined according to the loan duration. Amortization is a term which 
describes the dynamic ratio of principal to interest during a mortgage payoff. In the beginning, the payments
mainly consist of interest, and far less principal. Towards the end of the mortgage, as the balance of the 
principal is closer to being paid off, there is less interest cost so the payment mainly consists of principal.
 
An annual percentage rate will apply to every mortgage. This rate is usualy between 5 and 8 percent of the total 
mortgage value. Lower rates are usually extended to those with the best credit standing. Also, APR can be
fixed rate or adjustable rate (APR). The latter type mortgage usually has a lower initial interest rate, sometimes 
even 1 or 2 percentage points, but this type can be adjusted later in the duration of the mortgage.