What is a mortgage?

When buying a home, unless you have the full amount to pay for that home, you would normally have to take out a loan to buy the house. That amount then is paid back in smaller sums over a agreed period between you and your lender.

The lender will add interests onto the sum that you’ve borrowed. The interest charged will depend on many factors.  These can be varied and complex, so you’ll find that different lenders will charge you different rates, so its always wise  to shop around and find the right lender that’ll give you the best possible deal.

So where can i get a mortgage from?

You can get a mortgage from lenders such as banks, building societies and specialist mortgage lending companies, or you can also use a mortgage broker who acts as an middle man that sells mortgage loans on behalf of individuals or businesses.

If you change lenders but don’t move home it is called a ‘remortgage’.

what are my mortgage repayment choices?

There are two ways to pay your mortgage, ‘repayment‘ and ‘interest only‘.

With an interest only mortgage you make monthly repayments for an agreed period but these will only cover the interest of your loan, the rest of the amount you would normally have to pay back at the end of the agreed period.

A way of making sure that you can afford this is to make  different payments  into another savings or investment plan that’ll hopefully pay off that amount at the end of the term.

Some mortgages gives you options to vary your monthly payments, or to combine your mortgage account with savings and other income – these are called flexible, current account and ‘offset’ mortgages.

With  a repayment mortgage, you pay back not only interest but also bits of the loan also at the end of each months.  The advantage of this is that over time your loan will be reduced and gradually paid off.

The disadvantage is the higher amount that you will have to cover each month, so it worth considering other out goings to make sure that you can afford to choose this option.

Insurance options might be needed?

You may require you to take out life insurance by a lender to pay off your mortgage should you die, which is known as Mortgage Protection Life cover.

You can also get insurance to protect your income or just your mortgage payments if you become ill or disabled, or lose your job, which is known as Mortgage Payment Protection Insurance (MPPI).