What is a Mortgage?
First time buyers may have heard the dreaded word “mortgage” a thousand times and will have a vague idea of what it entails, but there may be a few details are still a little hazy. To start of small, we’ll tackle the definition; a mortgage is a loan that covers the cost of a home – emphasis on the word ‘loan’. You are obliged to pay it back over a certain amount of time, which can sometimes reach as far as thirty years.
The loan can be offered to you from banks, companies known as non-bank lenders or mortgage brokers. Non-banks lenders are more likely to provide the lifeline if you have a poor credit history so you have more chance of finalising mortgage agreements if you receive help through them. However, the mortgage brokers are specialists who can provide the best advice and they have more options to offer you.
– Down Payment – This is the money you are required to put into the house, just to show your lender you can make payments. This is just a reassurance for them as it proves you will take the repayment seriously.
– Principle – The principle is the amount of money you will borrow and pay back over the course of a few years or even decades. This will be the price of the home minus the down payment.
– Interest – Nothing is free, and the loaner isn’t passing on money to struggling home owners to fulfil their good deed for the day. This is part of their business so they are aiming to make some profit from you. They will therefore require an additional sum of money after you have repaid the principle as interest. The amount will be a percentage of the money you borrowed added on to the end of your debt.
Types of Mortgages.
– Fixed-Rate mortgage – the interest rate will not vary over the length of time your loan is in place.
– Adjustable-Rate mortgage – These start with a lower interest rate but will adjust at a pre-determined point of time, typically after a period of five years. Don’t panic though, there is a cap to prevent the rise wreaking too much havoc with your income.
You must consider…
Remember to shop around for a mortgage, just like you would for the house itself, because there are many possibilities out there and there will be one more suited to your needs than others. Mortgages vary in how much money they can loan, how much you should put in as a down payment and how long you will be given to pay back the principle. Consider each mortgage carefully, weighing them against each other and deciding which one suits you best. We would also suggest looking into a mortgage pre-approval, which would show loaners you are a reliable person to loan money to. It will also let you know how big of a property you can afford.
Other things to think about before filing for a mortgage include:
– how much money you’ve got saved for a deposit
– the type of property you’re buying
– how much you can afford to pay each month
– how long you would like to be paying it off for.
Mind the step.
If you have any questions this information didn’t quite answer, feel free to contact us with your queries. You need the right mortgage for you, and we need someone to share our wisdom with…let’s help each other out. Call us for friendly advice today 0121 249 0783