Let's break down the mortgage jargon in a simple and fun way!
A mortgage is like a special loan that helps you buy a cool property. You borrow money from a bank or building society (fancy word for a mortgage lender). You can get a mortgage by yourself or with friends or family.
Now, here's a fun fact: the word "mortgage" comes from Old French and means "death pledge." But don't worry, it has nothing to do with actual death! It just means that the loan ends when you fully pay it off.
When you get a mortgage, you and the lender agree on some important stuff:
Mortgage term: This is how long you take to repay the loan. It can be anywhere from 5 to 40 years. The shorter the term, the quicker you become the boss of your property.
Mortgage rate: This is the interest the lender charges you. It's like a little extra you pay back on top of the loan. You agree on the rate before signing the contract.
Now, let's talk about how you repay the mortgage:
Interest-only: You only pay the interest each month. This means lower monthly payments, but at the end of the term, you'll still owe the original loan amount. So you'll need to save up or sell your home to pay it back.
Capital and interest (or "repayment"): You pay back a bit of the loan itself (capital) and the interest each month. Over time, the loan balance goes down, and by the end of the term, you're debt-free!
To get a mortgage, you'll need a chunky upfront payment called a deposit. It's usually around 5% to 10% of the property price. The bigger the deposit, the smaller your loan, and you might even get better interest rates!
Before lending you money, the mortgage lender checks a few things, like your age, residency status, income, credit score, and spending habits. They want to make sure you can pay back what you borrow.
Remember, there are some additional costs besides the deposit. You might have to pay stamp duty, arrangement fees, legal fees, valuation fees, and even bank transfer fees. Yikes!
Oh, and you can't apply for a mortgage until you find a specific property. But you can get a mortgage in principle (MIP) certificate to show you're serious about buying.
Now, here's the serious part: if you can't pay back the mortgage, the lender can take possession of your property. But don't worry! They usually try to help you first, like adjusting payments or offering short breaks from paying.
So, that's the scoop on mortgages! If you're ready to take the plunge, Ape Finance and other mortgage brokers can guide you through the process. Happy house hunting! for more detailed and focused information, check out our other guides.
