Buying a house is an expensive personal investment, so it’s important to choose the right mortgage for you. Find out the basics of mortgages in this short guide, including things to consider before signing on the dotted line.
A mortgage is a loan you take out to purchase a home. But what does that actually mean? It sounds pretty simple, right? If you want to know more about mortgages, read on!
Buying a home is usually seen as one of the most important financial decisions you’ll make in your life. A mortgage is an agreement that gives somebody else the right to take your home if you fail to repay them. Read this article for everything you need to know about mortgages.
What is a mortgage?
A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money. A mortgage can be for a number of purposes, from a home to a car loan, but the main purpose is to take the property.
Borrowers usually put down a considerable down payment and make the initial payments. The remainder of the debt is usually interest-only and is repaid over a set period of time. Mortgage lenders, sometimes called lenders, are usually people that we know.
Most lenders have an office and employees that we can contact to get the information that we need and to facilitate the process. What is a Mortgage Mortgage agreement is between you and a lender.
Types of mortgages
There are several types of mortgages. Those that are available to us as home buyers are fixed rate mortgages, variable rate mortgages and equity loans. With a fixed rate mortgage, your interest rate is the same irrespective of the amount you pay, the fixed amount of money you have borrowed and the length of the mortgage.
If you repay the agreed amount at the end of the agreed term, the balance due will be repaid to you. Variable rate mortgages or ‘variable rate’ mortgages, on the other hand, work on a ‘market value’ basis.
Your interest rate changes based on what the Bank of England says the interest rate will be in a year’s time. This means that there is a risk of a rise or fall in interest rates, which may make repaying your loan more or less attractive.
The Process of Getting a Mortgage
The mortgage application process has been described as a tedious and stressful process. Yet, it can be done. Even the simplest loan can be approved, as long as you have sufficient financial resources.
Therefore, make sure you have the required documentation including income and employment records and payment records for all your bank and credit card accounts.
Using the services of a mortgage broker is also a good option because it helps in structuring a proper mortgage loan for you.
You can access several banks’ mortgage rates on the Internet by choosing a lender carefully and have them send you the required documentation.
How much does it cost?
You can usually get a mortgage from anywhere between 0.5% to 2% of the home’s worth. Lenders tend to be more keen on the buyer paying up a deposit. For example, a lender might ask for 10% as the first payment, and then a further 5% when you move in.
How long do you have to pay it off?
Depending on the mortgage you’re going for, you should pay it off in 15, 25, 30, or 40 years. If you pay the mortgage off in 30 years, your payment will be 1.5% of the property’s worth each month.
However, because the value of the property will likely have gone down a bit, it’s best to take out a shorter mortgage so you don’t have to pay out more than you earn each month. Will you pay more in interest?
Where to go for the best deal
Lenders generally sell mortgages in separate sections of their websites, giving you the chance to view all of the available deals before you make a decision. However, it’s easy to look at these deals online before you contact a lender and decide to take a ‘cash and sort it later’ approach.
If you’re going to pay with a mortgage, then it’s also a good idea to check with your existing lender to see they offer options other than putting the money up front.
Assuming your lender does, then the more interest you can get upfront, the better. In case you’re not going to get a mortgage, it’s best to first check with a friend or family member that might be able to put the money up front, or if your mortgage provider offers an overdraft facility.
How to decide which type of mortgage is best for me?
There are five different types of mortgages you could take out if you want to buy a property: Low rate A low rate is the cheapest type of mortgage to get if you only want a small deposit.
It’s also the most flexible, so you don’t need to make sure you can afford to pay back the loan if you need to. Best for those who want to spend as little as possible on their mortgage, you can get a low rate from most lenders without using your own cash.
The advantage of a low rate mortgage is that you get to keep all of the interest you’ve saved each month. The disadvantage is that you’re likely to lose money if you get into trouble.
Popular low-rate mortgages include the Post Office 10-year fixed rate at 1.69% and Coventry BS’s two-year fixed rate at 2.25%.
What should I consider before making an offer on the house?
- A house is only as good as the money you put into it.
- The appraisal is probably the best way to look at the property.
- The inspection may show problems that are bigger than the agreed price.
- The surveyor should not tell you too much about the property.
- With the money you put into it, you have to show a good income source. For the mortgage repayments, at least for six years.
- After that time the value will have increased and you may start to get better results.
Getting a mortgage Getting a mortgage will only get more complicated as prices rise. Banks shrink and there are fewer lenders offering the product.
The Mortgage Market Index says that only 3 per cent of the UK population own their own home. And so for them obtaining a mortgage is already a challenge.
It is true that there is a large gap between, the large volume of jobs. And the real estate market in this country. However, that gap should be further reduced. Given the trend in technology, any number of jobs are being outsourced. Leaving only a fraction of the number of jobs in the country. T
he same trend is happening with real estate as well. Considering this trend, we might be hearing about a new trend of hiring college graduates in various trades. These young students are ready to get hired by various big companies.
There is an increasing possibility of people taking a second look at buying homes. Still, it must be noted that this trend is not sustainable in the long run. It is a feasible option for a couple of months, but eventually we will be seeing many more home failures.