The Basic Concept Of A Mortgage

If you are new to borrowing and are just looking for your first home, then you probably are unsure about how mortgages work, and what the various types of mortgages are. If you are about to get your first mortgage, then you need to know the basics of what mortgages are and their various features. Here is some useful advice on the basics of mortgage lending:

What is a mortgage?

A mortgage is the loan that you take out to pay for a property. The loan is split into the capital and interest. The capital is the amount you have actually borrowed to buy the property, and the interest is the amount the lender charges you for the privilege of borrowing. There are various types of mortgages, but in general the two main types are repayment mortgages and interest only mortgages. Repayment mortgages are ones that require you to pay back the capital and interest each month. Interest only mortgages require you to pay just the interest each month and then the final capital amount at the end of the mortgage term. Whatever type of mortgage you are looking for, there are a number of features you should consider:

Interest rate

The interest rate of the mortgage is very important, because the lower the interest rate, the less you will pay back over the loan term. Mortgage rates are lower than most other types of loans, at around 5 or 6 %.

Exit fees

When you take out a mortgage, you agree a length of time over which you will repay the loan, known as the mortgage term. If you leave during the mortgage term to use another lender, then the current lender will often charge exit fees to allow you to leave. You want a mortgage with low interest rates, but also make sure that you are fairly free to change lenders if required.

Insurance

As with all loans, you will be offered insurance on your mortgage, in case you are ill, out of work or die and can not make the payments on the mortgage. When getting mortgage insurance, make sure that you are not paying too much for it and that your other insurance policies do not already cover you.

How do you get a mortgage?

Mortgages can be obtained from banks, specialist mortgage lenders and online lenders. If you are looking for a mortgage, Cherry Creek Mortgage can help you find the best deals before committing to any particular loan program.