Use our UK Finance guide and learn by experience. We outline pitfalls so that you don't have to learn the hard way, as many of us often do.
Mortgage
Are You Ready for a Home Mortgage Loan
So you're considering buying a home for the first time. The mortgage brokers are talking about figures of money that you've never had to deal with before and trying to get you to sign huge documents… feeling a bit overwhelmed?
Well rightly so. For many, buying a mortgage can be a very nerve wrecking experience. For most people, a home mortgage is the biggest debt that they will ever take on. It'll also likely be the largest payment that you'll have to make each month. When you calculate how much you'll have paid by the end of your home mortgage period, it's always a bit of a shock and it's a sobering experience for most.
However properly understanding a mortgage and the whole process involved can greatly reduce your fears and anxieties and allow you to confidently proceed through the process.
For many, getting a mortgage for the first time is scary because of the large amounts of money involved and because of the hundreds of mortgage brokers all claiming to be the best and claiming to have the best deals.
Remember that if you get into a position where you default on your mortgage, it hurts you as well as the institution that leant you the money. Thus you can rest assured that the mortgage broker will do his best to properly asses your current situation and make sure that you can afford the mortgage both short and long term.
Remember too, that you've probably being paying rent for a while now and you've managed to pay that every month haven't you? There's little difference with paying off a mortgage: you're paying an amount each month just the same as if you're paying a rental. The bonus of a mortgage is that you're slowly but surely increasing your equity in the home. The home is becoming yours. Your own home!
Take an honest look at your own finances and then decide whether or not you'll able to sign a mortgage. Speak openly with your broker or realtor and tell him your financial situation and let him, being the experienced one, tell you what kind of a home you can afford.
Everyone who reads through their first mortgage agreement will have nightmares of losing their job or experiencing other difficulties that will eventually lead to you not being able to keep up with your payments and then losing your home. It's a scary thought process and will no doubt lead to many sleepless nights as you ponder over your options
Let's take a second and look over your fears. For most people, their greatest fear is that they will default on their payments and lose their home. Well let's analyse this scenario for a second. Say you do miss out on a payment and your lender forecloses your home. What have you lost really? Your mortgage payments essentially change into rental payments and the money you've paid so far can be viewed as money that was spent to keep yourself housed. The house didn't belong to you yet so technically you haven't lost the house.
But getting to the point of foreclosure isn't as easy a process as some make it out to be. Remember that the lender doesn't want to foreclose your home. He'll make more money in the long run if you keep the home and continue the repayments. So rest assured that he'll do everything in his power to help you keep that house.
Remember too that if you have rented an apartment before, the fear of signing a mortgage has essentially already been overcome. When you signed the lease for the rental, you faced the same dangers as you would on a mortgage: default on a payment and you lose the rental apartment. It's the same for a mortgage.
Remembering all this will help to put things in perspective when signing your first mortgage. However your greatest fear, that of losing your home because of a bad financial situation can be overcome by carefully sitting down and realistically analyzing your finances to make sure you can afford it.
