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Introduction to Mortgages

Property sold image

A mortgage is a loan used to buy property: typically a house. It is the standard way for individuals or companies to purchase residential or corporate property when they are unable to immediately pay the full asking price. In return for the loan, you pay interest on the amount borrowed and repay the debt in installments over an extended period. The average period of time for repayment (known as the mortgage 'term') is twenty-five years, but you may choose a shorter or longer term if you wish. During this period, your house provides the mortgage lender with security: in the event you are unable to repay the amount borrowed, they may sell the house to recover their losses.

The amount you can borrow is dependent on a number of factors: the price of the house; your personal circumstances, such as income and credit rating; and the lender and mortgage deal you choose. In most cases, you cannot borrow one hundred percent of the property's asking price, which means that you are usually required to save a considerable amount before you apply for a mortgage. Typically, you would borrow around seventy-five percent of the property's price and pay a 'deposit' of twenty-five percent. The deposit is a lump sum payment which is paid before the completion of the property's sale. Previously, lenders offered one hundred percent mortgages, which gave you the opportunity to borrow the property's total selling price, and removed the need for a deposit. However, due to the 'credit environment', lenders are no longer  offering these types of deals and most of these mortgages have been withdrawn. For further details on this topic see Loan Amount.

There are numerous types of mortgage. Which mortgage deal you choose will affect the way in which you make repayments, and how interest is charged and calculated. Most mortgage providers offer a range of specialised mortgages, which could offer you a better deal. Choosing which mortgage to opt for can be confusing, so you should  use a mortgage broker who can compare the different deals and help you choose one that best suits your needs.

Although a mortgage is a long-term financial commitment, you are rarely tied to a particular mortgage for the full term. This means that if another lender offers a better deal, you may decide to 'remortgage'. Remortgaging means switching your existing mortgage to a new deal or mortgage provider. There are several reasons to remortgage: perhaps the most important is to reduce the overall cost of buying a property.

For further information about Mortgages see:

> Types of Mortgage

> Choosing a Mortgage

> Applying for a Mortgage

> Interest Rates

> Additional Costs

> Credit Rating

> Missing Payments

> Insurance Protection

> Remortgaging

> Early Repayment

> Complaints Procedure

> Mortgage Crisis in Australia


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