Mortgage and Refinancing Information Channel:
We would like to thank the local libraries, schools, and universities for recommending students to visit us when doing research on any of our information topics.
A mortgage is borrowing money using property as a security, a type of secured loan in other words. Primarily, the purpose in borrowing the money is to purchase a property.
A mortgage is really another word for a property loan - a loan that allows you to borrow a large amount of money in order to buy a home or property which is secured on the value of that property, and which you pay back over an agreed period of time.
The term 'secured' means that if you default on payments and can't keep up with the payments schedule as agreed, the lender has the right to sell your property in order to recover their money.
A mortgage can be broken down into four main parts:
Capital - This is the amount of money that you borrow to buy the house.
Interest - This is the charge for borrowing money. Worked out as a percentage of the capital.
Term - This is the fixed period of time that the money is borrowed over.
Repayments - These are the regular payments you make throughout the term of the mortgage.
The mortgage is created by a legal charge on the property and, significantly, does not involve the transfer of land. The charge confirms that the property has been pledged to the lender as security for the mortgage loan.
Mortgages are usually repaid over 25 years, but depending on your situation and earnings it can be arranged over either a longer or shorter period of time. The amount you borrow is called the 'capital', and you will also have to pay back the interest charged to you by the lender.
The title deeds are held by the lender but when the purchase monies are paid over to the vendor, usually through a solicitor, the mortgagor becomes the owner of the property. The legal charge is supported by a loan agreement between the two parties which sets out the terms of the loan, the responsibilities and undertakings.
You have two options - repay the capital and the interest together - this is a 'repayment' mortgage, or repay the interest only, and organise another investment to cover the capital at the end of the term. This is known as an 'interest only' mortgage.
When looking at how much money a lender is willing to let you borrow, there are two factors that they will want to consider.
First of all, they will want to know how much you earn. Usually you will only be able to borrow around three times your salary.
If you are looking to purchase a joint mortgage with a partner or friend, then the income multiplier may be worked out differently. Some lenders will offer two-and-a-half times the joint salaries, or three times the higher salary, and one times the lower salary, whichever is higher.
Most lenders will also take into account the amount that you are looking to borrow, and the total value of the property. Although some lenders will allow you to borrow the full value of the property, most will only lend a certain percentage, say 95%.
When applying for a mortgage, there are certain points that you will need to consider before you sign on the dotted line.
First of all you need to consider how much you can afford. You should complete a budget, and work out how much money you have coming in, and how much money you spend each month. This should then give you an idea to how much you can afford to pay a lender each month for your mortgage.
You should also consider whether your income would allow you to afford the property you are after.
You also need to think about how long you will need to borrow the money for. A mortgage is a major financial commitment and will require that you can keep up the repayments for the full term.
If you repay your mortgage before the end of the designated term you may well be charged a penalty. Penalties are particularly common in the first few years of a loan or if you are taking advantage of a fixed rate or a discounted rate and can be very significant in size. Sometimes it is possible to serve notice to avoid these penalties.
Furthermore, some lenders will charge interest until the end of the month in which redemption occurs so it may pay you to time the redemption of your mortgage to avoid this charge. Some lenders also make additional charges such as vacating fees, deed release fees or other administration charges.
All of these costs should be highlighted in the mortgage offer or in the standard Terms and Conditions provided with that offer. Before committing to your mortgage, please check the redemption penalties which will be mentioned in the mortgage offer.
Getting a mortgage can be very complicated. If you are unsure about which mortgage to go for, then you should seek some financial advice.
You may freely reprint this article provided the author's biography remains intact:
About The Author
MORE RESOURCES updated Fri. September / 29 / 2023
CFPB Mortgage Report Finds Jumps in Closing Costs and Denials ... - Consumer Financial Protection Bureau
CFPB Mortgage Report Finds Jumps in Closing Costs and Denials ... Consumer Financial Protection Bureau
Buy Now, Refi Later? 84% of Recent Homebuyers Are Banking on It U.S News & World Report Money
How to lower your mortgage payment Yahoo Finance
Can You Roll Closing Costs Into Your Mortgage? GOBankingRates
What's the cost of refinancing a mortgage? Mortgage Professional
VA loan refinance: What is it and how does it work? Yahoo Finance
Justice Department Secures $9 Million Agreement with Washington ... Department of Justice
What is a good student loan interest rate? Yahoo Finance
What to Do If Your Adjustable-Rate Mortgage Is About to Adjust Higher The Truth About Mortgage
3 Signs You Can Afford a Home Now That Interest Rate Hikes Have ... Business Insider
The Great Pandemic Mortgage Refinance Boom - Liberty Street ... Liberty Street Economics -
Refinancing your mortgage could save you thousands — here are some of the best refinance lenders - CNBC
Refinancing your mortgage could save you thousands — here are some of the best refinance lenders CNBC
Today's 30-Year Mortgage Refinance Rates | U.S. News U.S News & World Report Money
11 Home Refinance Loans For Bad Credit (Sep. 2023) BadCredit.org
Should You Refinance Your Home Loan? Credible
Compare Today's Refinance Rates | U.S. News U.S News & World Report Money
Current mortgage refinance rates in 2023 USA TODAY
Should I Refinance My Mortgage? - Buy Side from WSJ The Wall Street Journal
Here’s how sharply mortgage refinancing has dropped off Yahoo Finance
15-Year Mortgage Refinance Rates: Compare Current Rates Business Insider
Loan officer: I’m seeing middle class homebuyers take on $7,000 mortgage payments thinking they can ‘always refinance when rates come down in the future’ - Fortune
Loan officer: I’m seeing middle class homebuyers take on $7,000 mortgage payments thinking they can ‘always refinance when rates come down in the future’ Fortune
30-Year Refinance Rates: Compare Current Mortgage Rates Business Insider
Mortgage Rate Forecast: When Will Rates Go Down? U.S News & World Report Money
Mortgage and refinance rates today, Jul. 3, 2023 The Mortgage Reports
Mortgage Refinance Rates SFGATE
Should you refinance your mortgage to pay off debt? New York Post
Why Older People Can’t Get New Mortgages The New York Times
What Credit Score Is Needed To Refinance a House | Chase Chase News & Stories
What Happens After You Refinance a Car Loan? Investopedia
Should I refinance my student loans? MarketWatch
How to Refinance Student Loans in 5 Easy Steps LendingTree
How to Refinance a Car Loan in 2023 Investopedia
How to Tap the Value of Your Home—Safely Consumer Reports
These 4 mortgage lenders can be excellent choices for seniors — whether you're refinancing or getting a new home loan - CNBC
These 4 mortgage lenders can be excellent choices for seniors — whether you're refinancing or getting a new home loan CNBC
CFPB Launches Effort to Spur New Opportunities for Homeowners ... - Consumer Financial Protection Bureau
CFPB Launches Effort to Spur New Opportunities for Homeowners ... Consumer Financial Protection Bureau
Rocket Mortgage review 2023 USA TODAY
VA Refinance Rates - Current VA Loan Refinance Rates Today Business Insider
Home equity loan or HELOC vs cash-out mortgage refinance Yahoo Finance