Buying a home?
You must be a growing family who needs more space or just settling down in another place for better prospects, one thing is sure. Most of the people in the US and also around the world require a mortgage. But much as you would not want, the world of mortgage is filled with technical jargons and complicated rules and regulations. Many people get threatened by these jargons and do not fully explore the option of buying a home on mortgage. Yet others will half knowingly apply for one and eventually feel confused and helpless when they cannot make anything out of the rules yet are bound by the terms of their mortgage.
You don’t need to be a financial know-all to understand a mortgage:
Definitely not! All you need to really know is to be able to break down the information that the mortgage companies advertise with and you will know exactly what the best deals are for you. Here is a comprehensive list of things that you most definitely need to know if buying a home with the help of a mortgage is right now on your mind.
Meaning of mortgage:
When a bank or a building society gives you loan, the collateral for which is the property that you wish to buy that loan is itself called the mortgage. This is the most basic definition of a mortgage.
Initial deposit – rate of interest – repayment:
The next step for you to understand is that if your mortgaged is approved hypothetically say by ABC company then you will be required to put down the initial deposit. To help understand chattels here is an example, you have put down 20 percent of the value as the initial deposit on the mortgage. The remaining 80 percent will be paid by the mortgagor on your behalf. The rate of interest will be calculated by the mortgagor on that 80% only and the repayment will start as soon as the next date of repayment is due.
Repossession of the property in case of default:
You will be required to pay your repayment in pre fixed installment son time and in case of any default, there is most likely the risk of the mortgager taking the possession of your house. Money Saving Tips - 55 Painless Ways to Save Money.
What will he do next?
In case you default on the repayment and say the mortgagor takes action for repossession of the property. He then will have all the rights to sell your property I order to get back the money that he is invested by mortgaging the property. He has a legal right to do it.
Repayment nitty gritties:
When you shop around for a mortgage, you will need to understand your financial standing and do a comprehensive and actual appraisal of yourself. This according to us is a very important step. Because this will make the things very clear in your mind. If viable start noting the various points on a piece of paper so that you know what exactly it is. You will first of all want to determine exactly the percentage of the value of the property that you can pay as the initial deposit. Then also have a very clear picture about the repayment terms. The rate of interest for the first few years will most of the times stay constant whereas after say a period of four to five years or as agreed between the parties, the rate of interest will start varying.
Variance in the rate of interest:
After a set period, the rate of interest on the mortgage will start varying and it can oscillate around the low and the high range of your original rate of interest. This variance in the rate of interest is directly connected to the ratio of the loan to the value of the mortgaged property. So, if you have put lesser percentage of money as the initial deposit in the mortgage then the costlier the mortgage will be and the rate of interest will also peg on the higher side. Therefore it makes a lot of sense really to put a big chunk of initial deposit from your own pocket.
By determining the loan is to value of the property, you must also keep in mind that your repayment will start almost immediately from the next month itself. And so you must do your calculations properly in order to not default repayment. Continuous default n repayment for a period of couple of months and more can attract penalty or at the worst forfeiture of the mortgaged property itself. The golden rule therefore is to know your finances well before taking the plunge.