Guide to Refinance, Mortgage,
& Home Equity Loans in
Florence, Alabama (AL)

Florence is part of the economic hub of northwestern Alabama. It has all of the advantages you expect of a regional hub—shopping, business, culture and art, healthcare and university-level education. It is also a sweet Southern town where your neighbors take pride in southern hospitality, good manners and friendliness.

There is a lot of history in Lauderdale County, where Florence is located. There is a huge, ancient Indian burial mound there. Pope’s Tavern is in one of the oldest buildings in town; it was a hospital during the Civil War. The whole community gathers for good food and good music during the W. C. Handy Music Festival, honoring W. C. Handy, the Father of the Blues.

If you are moving to Florence, or of you are a current resident planning to buy a home, you will be pleasantly surprised at how affordable homes are. You can find nice homes for under $200,000.

Whether you are purchasing a home, refinancing, or considering a home equity loan, you should have a basic understanding of mortgage terminology.

A mortgage is a loan on property. You borrow money from a lender to purchase your home. The home is the security for that loan, which means the lender can take possession of it if you do not pay the loan.

Refinancing is taking out a new mortgage and paying off the old one.

A home equity loan is also called a second mortgage. It is a loan that is secured with your home, and it is in addition to your original mortgage.

A home equity line of credit is similar to a home equity loan, except you do not borrow a lump sum of money. Instead, you have an account that you can draw on as you need to. You only pay interest on the money you draw out of the account.

Principal is the amount of money you owe to the lender. Initially, you will owe the home price minus your down payment. As you make payments, the principal will get smaller until it is paid off.

Amortization is the process of reducing your debt by paying down the principal in regular installments.

Negative amortization can happen if your house payments are less than the interest that has accumulated during that month. The excess interest is added to the principal, so it gets larger instead of smaller.

Interest is the same thing as a finance charge. It is what the lender charges for borrowing money. It is expressed as a percentage of the money owed to the lender.

The term of a loan is the length of time it will take to pay it off by making monthly payments. Mortgage terms vary from 5 to 50 years, but most purchase and refinance mortgages have 15, 20 or 30 years. Home equity loans usually have shorter terms.

A fixed rate mortgage is a mortgage with an interest rate that does not change.

An adjustable rate mortgage (ARM) is a mortgage with an interest rate that changes at specific times and intervals as specified by your contract.

The interest changes on an ARM are indexed, which means they are determined by changes in a specific standard, or index. Treasury bond rates are a common index, but there are several others. Your interest rate will be equal to the index plus a margin, which is the lender’s profit.

It is helpful to understand these and other terms whether you are applying for a first mortgage, a home equity loan, or a refinance. You will find more home mortgage terms and a lot of other excellent information on the HUD website: http://www.hud.gov/offices/hsg/sfh/buying/glossary.cfm.

When you are ready to talk to a lender, you can find one right here by filling out the form on this page.

Other Alabama (AL) Guides to Refinance, Mortgage, and Home Equity Loans in Your City or Town:

(Click on any city name below for more information on finding a local or national lender near you & saving money!)

Looking for more specific information on refinancing, getting a mortgage, or taking out a home equity loan/line in Alabama (AL)?
We can help with that – Click below for details:

Alabama Refinance

Alabama Home Equity

Alabama Mortgage