Buying a home is an exciting time for anyone. Whether you’re accommodating a growing family or buying for the first time, it’s easy to get wrapped up. This is particularly true when you’ve found your new home. At this point, priorities become heavily focused on the new home. And, of course, they should be. But, this leaves a lot of people in bad shape with the mortgageadfadfafda.
Understanding your mortgage is incredibly important. A lot of different mortgages exist out there, and they all have different features. So, you need to learn what these features are and what they mean. Without a legal team, this seems like an almost impossible feat. To help you out, though, this post will go through some of the terms that mortgages and their providers use.
Term
When you take out a mortgage, you agree with the bank that you will pay them back within a certain amount of time. This is the term of the loan. If you don’t pay back within the agreed time, banks have the power to forcibly take the money from you. In some cases, this may mean losing the house. It’s very important to make sure that the term you choose is appropriate. If you choose a term of 10 years, but can’t afford the repayments, you may be better trying to have a longer term. Banks will be open to discuss your term, even after the loan has been agreed. So, it’s not too late to change it if your situation changes.
Down Payment
Of course, when the bank is lending so much money, they want you to contribute at least a small share of it. This is the down payment. In most cases, banks will require at least 10% of the overall property value as a down payment. This means that you have to do a little saving for your house before you buy it. But, it also means that you own a portion of your house, right from the start. Saving a down payment can be hard. So, talk to your bank and see what sort of services they offer to help you.
Interest Rates
When the bank lends you money, they’re not doing you a favour. For them, giving out a loan is like making an investment. This is because you have to pay back more than you borrow. When you take out a loan, you will see that it has an interest rate. This rate dictates the overall price of the loan. For example, if you were to borrow $1000 and the interest rate was 2% a year, you’d have to pay back $1020 after a year has passed. On big loans, like mortgages, the bank makes even more money. You can use sites like Lending Tree to find the best rates on mortgages. Impartial advisors like that can be your key to success.
Fixed/Variable Rates
Interest rates vary between banks and will go up and down over time. Traditionally, you’d pay the interest rate set at the start of the year. This means that one year you could pay more or less than the next. Nowadays, alongside variable rate mortgages, you can also get fixed rate ones. With a fixed rate mortgage, the interest rate won’t change for a set amount of time. Usually, this time is something like 15 or 30 years. Once the fixed time is over, the mortgage will become variable. Each side is risky. With a variable mortgage, you risk rates going up and costing you more. But, with a fixed-rate, you risk rates going down while you still have to pay a higher one. To overcome these issues, you have to assess the current economy.
Leasing
Some people like the idea of becoming a landlord. But, to lease a property, you need to make sure that your mortgage allows it. A lot of banks also refuse to consider rent as income, especially when it’s future rent. So, you need to afford the mortgage by itself. And, then, you also need to make sure that the contract you sign allows you to lease the property, as a lot of mortgages don’t. If you need help figuring this out, you can talk to your bank.
Mortgages are very complicated legal procedures. It’s worth talking to a professional about your situation before applying. Most banks will be happy to help you find the best option. They don’t want to sell you something that you can’t pay back. That would be a waste of money for them. But, they do want to sell you something. So, be careful.
Hopefully, this will take away some of the fog, when it comes to applying for your next mortgage. The law is different everywhere, so when doing something like this, it’s always worth doing some research.
