The Understanding of Mortgage
Everyone desires to own a house if not home at some point in their life for comfort and attainment of some set goals. This desire may not be met abruptly but with meticulous planning, financial engagement, and wide consultations. The financial aspect of home or house ownership has been made easy and faster by the existence and availability of remortgages offered by financial institutions. A mortgage is, thus, a loan advanced to an individual by a bank or any financial institution to help in home purchase and ownership. The institutions advancing mortgages do not only offer financial support but, also expert mortgage advice for proper planning and decision making.
Types of mortgages
When you go out to pursue the acquisition of a mortgage loan bear in mind that it comes in two types; fixed and adjustable (variable) rate mortgages. The fixed-rate gives a loan at a fixed interest rate over some time while the adjustable-rate gives loans on a variable interest that change over the loan’s lifetime. These two types of mortgage loans occur in varied forms as well:
- Equity Release – this is finance taken against your already existing home or property
- Purchase Financing – a loan advanced to you to purchase a readymade house
- Top-Up – an additional loan you take on your existing mortgage loan due to the reduction on the loan amount or appreciation in the value of your property
- Balance Transfer/Refinance – it is the transfer of an existing mortgage from current financier to another due to varied reasons
- Construction Finance – a loan advanced towards the funding of the building of a residential home or residence
- Plot Purchase – this mortgage is given to fund the purchase of vacant land
Components of a mortgage
You may choose to go it alone or engage the services of a mortgage broker, a mortgage advisor or mortgage broker Southend in your efforts to own a home. You must, however, take note of the components of a mortgage to get it right from the onset.
- Principal – this is the total amount of the loan given towards the purchase of the home. It can come in different percentages less that of the deposit you initially paid.
- Interest – this is a monthly percentage levied on every payment. It is the income banks get from the loan they advanced.
- Taxes – homeownership attracts property tax payable by the homeowner. The tax is calculated on the property or home value.
- Insurance – since the home act as collateral, insurance is taken by the homeowner against any damages that may occur.
Benefits of mortgages
When deciding to go the mortgage financing route, ensure to enlist the services of a mortgage financial analyst. There are several merits inherent in the acquisition of the loan that must be given weighty consideration.
- A mortgage grants you leverage where you can make money off that mortgage granted by the bank
- Security is an advantage granted to you by the mortgage as the insurance will come into play should any damage happen
- It is an investment opportunity especially when it comes to the eventual disposal of the property
- Cost-effective borrowing – the stiff competition existing has ensured that the interest rates charged are relatively low making borrowing cheaper