What is a Mortgage?
What is a mortgage? It’s the ultimate question we ask ourselves. If you’re looking to learn the answer to what is a mortgage, you’re in the right place.
Buying a house is going to be one of the most significant purchases you’ll ever make. And as if adult life wasn’t stressful enough, you’ve got to find a mortgage on top of it. Luckily, here at Mortgages.Online we’re here to explain what a mortgage is and where you can get one, so that next step becomes a little easier.
As you grow older, all those things you thought you would never have to do, appear out of nowhere. This can take the form of many tasks and formalities; loan repayments, paying bills and trips to IKEA without mum and dad dragging you into the car. Getting a mortgage also falls into this category. This can be a daunting prospect for most stimulating and savvy young people making their next move into adult life for a number of reasons.
For example, this can be because families may need to readjust finances and expenditure, cement their job security and also think about what their intentions may be long term to starting a family. But, what is equally important to remember, is that these fears are perfectly normal.
And guess what? You’ve made the first step to reducing those anxieties by finding this article! So, if you’re one of those wondering ‘what is a mortgage’, this post is going to break it down. Everything from what a mortgage is to where you can get one - broken down into small, bitesize chunks that you can use to put your worries at ease. Let’s get started!
What is a mortgage?
To put it simply, a mortgage is a large loan that you take out to buy a property. Not to be confused with an actual ‘loan’, a mortgage is a mortgage, but it’s a loan… Make sense? This can run for varying periods of time, depending on how quickly you have to pay the lender back, the cost of the property and how much you are paying the lender per month. However, a typical mortgage is around 25+ years.
The mortgage that you take out will also be secured against the value of your home until it is paid off. What this means essentially is that you, as the borrower, will have to pledge an asset, (in this case the property) as collateral. This means that the loan becomes a secured debt to the mortgage lender who provides the loan. While this all sounds very serious and intimidating... Do. Not. Worry. Keeping up with mortgage repayments means your house is safe from repossession.
Getting a mortgage:
Before you get your mortgage, it will be VITAL to work out what you can and cannot afford. This is important for many reasons, to make sure you don’t stretch yourself too thin and leave yourself vulnerable or exposed in a procedure that you might think is already stressful. This will involve thinking about the running costs that come with homeownership. Graduates and young professionals, we’re mainly looking at you, because lettings that come with ‘all bills included rent’ are a popular choice, so it may be difficult to adjust from this. Mortgage payments can be tricky to juggle, so make sure you can afford them.
Lenders will also want to see proof of your income and you’re committed expenditure so that they can assess your capability to pay back your mortgage. You will need to think about if you would be able to keep up repayments if interest rates were to rise, as lenders may also want proof that you will be able to keep up repayments if interest rates in the market begin to fluctuate. However, first-time buyers don't worry! One fee that you get to avoid is stamp duty.
Where can I get a mortgage?
While the simple answer may just lie with getting a mortgage directly from a bank, do not be afraid to shop around and take your time when deciding what lender to go for. If you are struggling to compare different providers or are getting confused working out which option is best for you. It may be worthwhile taking advice from an Independent Financial Adviser (IFA) or a broker. This can be of great help, as they can compare and contrast a multitude of different mortgage rates and work out what would be the most cost-effective option for you.
Take heed of this for how you carry out the rest of the mortgage process in the future. If you are unsure, seeking advice from a professional or someone that is experienced in the mortgage industry will always be a beneficial policy. Even if this comes from a close friend or a family member.
While it is still possible to choose a mortgage without receiving advice (known as execution only mortgages), you will be expected to know the type of mortgage and property you want, how much you want to borrow and the interest rate you want to borrow it. Now, if you’ve lost colour in your face, your jaw has dropped, and/or your eyes are wide open after reading that, then do not worry either. Go with the IFA or the broker and make your life easier.
You will need to confirm to the lender whether you’ve received advice, but regardless of advice received, the lender will need to carry out some affordability to checks to ensure you are capable of repaying the mortgage loan.
So, congratulations! Go and get the house your heart desires! Take your time, seek advice and use it wisely.
Use Mortgages Online to make your mortgage search all that easier, get started HERE.