Mortgages may be loosely categorized into two: the various regular mortgage plans offered by the banks and other lending institutions, and the owner-financed mortgage plan you strike with the owner directly. In a regular house-buying arrangement, a buyer puts in earnest money, a lump sum of something like 10-25% of the total cost of the property, as downpayment. The balance is the final amount that will more likely be fulfilled by a mortgage loan that the buyer will amortize to the lender on a regularly scheduled basis. In an attempt to have mortgages explained, let us tackle them based on general terms.

Some financing companies offer a mortgage loan with insurance fees in exchange for a very minimal premium, often less than 5%, of the final mortgage amount. Depending on the loan company, this premium could either be added to the regular payments or be paid in full when the sale is closed. Either way, interest is a burden in this regular type of mortgage because you have to keep in mind that there is interest on interest that you don