Use our Mortgage 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
Mortgages
The term mortgage refers to the formal document which proves as a legal claim or lien on your property that your lender holds as security for the money you borrowed for purchasing property. You 'the mortgage borrower' pledge the property as security for the repayment of the money you borrowed, but you do not transfer title to the mortgage lender. However if you make a default or do not meet the agreements of the contract, the 'lender' may foreclose your home through a court procedure in order to pay off the existing debt.
Because very few people are in the financial position to pay cash for a home or any other property for that matter, mortgages have become the most popular loan. A home mortgage usually has a life and a term. The life of a mortgage refers to the period of time you have agreed to pay the loan back, which is usually 20, 25, or 30 years. The term or also known as the amortization of the mortgage refers to the reduction or repayment amount of the loan, which is usually the actual debt and the interest added.
There are more varieties of mortgages than there is ways to kill a cat. Finding the right type of mortgage could easily be the most difficult and unknown part of buying your dream home.
Common Types of Mortgages:
Low interest rate mortgage – Interest rates differ from lender to lender; the lowest is not always the best.
Interest only mortgage – Some mortgage types also include huge upfront fees, and application fees as well as yearly renegotiations, however an interest only mortgage type will only have interest as an extra payable debt.
Adjustable rate mortgage – An adjustable rate mortgage will be renegotiated from time to time; unlike a fixed rate mortgage it will not have a set amount payment each month.
Fixed rate mortgage – A fixed rate mortgage can be very good if you live in a country where your interest rate is very volatile. This mortgage gives you the opportunity to fix your mortgage rate for the full term or part of the term of your mortgage.
Reverse mortgage - A reverse mortgage is very different to an ordinary mortgage. It involves payments by the lender to the borrower. A reverse mortgage is an arrangement whereby the homeowner gets cash in return for a mortgage on their home, which is used as security against the loan. This type of mortgage is usually used by the elderly for an extra income.
Before agreeing on any type of mortgage you should compare the types of mortgages and determine which one will suit your budget and lifestyle best. There are also many different online mortgage calculators which you can use to determine exactly how much your mortgage will cost you each month.
