A mortgage is a loan taken out in order to purchase a property or land. It could also be described as a ‘debt instrument’, which is secured by the collateral of a property until the loan is paid off. This means that the mortgage lender has the security that if for whatever reason you cannot repay what you have borrowed, they then have the value of your property as assurance.
It is common for most mortgages to run for a term of 25 years, but they can, in theory, run anywhere between a matter of months to 40 years, of which the most suitable term will be dependent on your personal preference and situation. The borrower will repay their mortgage in monthly repayments, which is calculated by several factors, including mortgage term and loan amount. If able to, it is wise to opt for the shortest term you can afford, as this will typically help with becoming mortgage-fee sooner and sparing yourself from more interest charges over a prolonged number of years. That said, for complete interest only mortgages the term doesn’t necessarily have the same impact, whilst the term is recommended to best fit the individuals plans and needs.
There are a different variety of mortgages available on the market, therefore it is possible that you will be able to find one suitable for you and your situation. A typical advantage of using a mortgage broker means the client will have access to all lenders available, so they can find a product tailored to you and your position. Whilst hear at Pinnacle we are ‘whole of market’ mortgage brokers, some other broker firms may work from a limited panel of lenders. A broker’s advice status should always be disclosed upfront, so the client can make an informed choice on if they’d like to proceed with the broker or not, and know the basis of the advice from the outset.
Now that we have explained what a mortgage is and what it consists of, let us divulge why a mortgage be may a suitable option:
Obtaining a mortgage allows you to make monthly payments towards a property that you will eventually pay off and claim as yours, rather than paying rent to fund someone else’s asset. It is also a long-term investment, and as the property market is notorious for increasing in value over time, this means it offers long term growth potential, although this is never a guarantee.
Purchasing you own home can give you a sense of stability, as you technically call the shots within reason, and the worry about the possibility that you may be subject to eviction is diminished subject to maintaining your mortgage commitment as per lender conditions. You also have the freedom to make alterations to the property, so you can tailor your home to your taste, to create a welcoming ‘homey’ atmosphere, subject to any relevant planning consent or permissions from a freeholder (if applicable). It is where you spend most of your time, and what most people consider their safe sanctuary, so this is another attractive advantage.
As previously mentioned, a mortgage is a long-term financial commitment. This can be beneficial for your quality of life, particularly later in life, like retirement. If you own a property by the time you retire, this means you will have housing security, with the comfort that you are residing in a home that you own, and you don’t owe anyone anything in the scenario the mortgage had been paid off in full prior to retirement.
Possessing your own home is a goal for many people, however in order to do so, the majority will require a mortgage. Taking out a mortgage is an important life decision, which should only be applied for after much consideration as it is a long-term scheme.
If there are any further questions or queries you may have regarding mortgages, or maybe you are hoping to apply for one, then please get in touch and a member of our team will be able to assist you.
Please be aware that your home could be repossessed if repayments are not kept up to date.