A mortgage is a type of a loan that is used to buy a property, where the interest and the amount you borrow from lending providers is secured against the value of the property. Then you have to pay the monthly payments, along with the interest, till the time loan has been fully paid back. You can even compare mortgages in order to find out the amount you can borrow as well as what the repayments will cost you in actual.
A mortgage makes owning a home affordable. Purchasing a home is one of the biggest purchases you will ever plan to make and the mortgage will be your biggest debt. The reason is that you can spread the repayments on your housing loan over a number of years; this way the total amount you have to pay back each month is more affordable and manageable.
These are the various advantages of a mortgage:
- Cost-effective way of borrowing
The rate of interest on mortgages is generally lower as compared to other forms of borrowing, as the loan is secured against your property. This means that the building society and the bank has the security that if in case anything goes wrong and you are unable to repay it, there is still something valuable, i.e. your property – to sell off to pay back some amount, if not all, of the mortgage.
- It makes home ownership affordable
As you all know buying a home is the biggest purchase and mortgage will be likely your largest debt. You can easily spread your repayments on your home loan over many years. Therefore the amount becomes more affordable as well as manageable.
Traditionally speaking, when most of the individuals take out their first mortgage, they generally opt for a 25 year term. But as such there are no specific rules for this. The life span of an individual has also increased and the retirement age too, is going up. Therefore, 30-year mortgages are very common. This has helped to get your monthly payment down, but on the other side, for a longer time, you will be saddled with the debt.
It is better to choose the shortest term you can afford. With this you will not only be saving thousands of pounds in interest but you will be mortgage-free sooner.
What is a mortgage calculator?
Mortgage calculators are a kind of automated tools which enable users to find out the financial implications of changes in a single or more variables in mortgage financing arrangements. You can even use them to compare mortgages.
These are few ways to pay off your mortgage faster:
- Make larger and regular payments
- Shop around
- Maintain a consistency in payment
To sum up all mortgages are not equal. Even if some loans have similar interest rate, there can be differences in the fees and points which make one offer more costly than other. Therefore, it is important to understand all of the vital components which go to determine the cost of your mortgage.
Choosing to compare mortgages with iSelect works brilliantly as AFG Mortgage broker team are efficiently accredited mortgage brokers who have your best possible interest in mind.