Mortgage 101: Tips
First Published: June 24, 2009 ADawnJournal.com
You would be surprised indeed to know that a great many people do not really know what a mortgage is. If you are one of those people, don’t feel too bad about it. You’re in good company, and quite numerous company at that. For one reason or another, in early years we don’t learn that much about private finance. In school we’re busy learning reading, writing and arithmetic, then sciences, languages, history and so forth. Then it’s off to college where we specialize in whatever we were really good at when we were at high school. After college we’re more concerned about finding a job than anything else, so by the time we get to actually dealing with buying a house we’re into our twenties and heading rapidly for our thirties.
It is therefore entirely possible to get to a certain stage in your life and all of a sudden realize that these “mortgages” of which so many of your contemporaries speak are actually an entirely foreign topic to you. You know they have something to do with houses and money, and you can probably assume that they are involved in making available the money to buy a house, but there is a whole lot more involved. Although you may well be fully aware that there is a lot more to mortgages than that, it may not be immediately clear to you what that “more” constitutes. Here are some of the basic, yet important, facts and details about mortgages.
· A mortgage is a loan taken out with the express purpose of buying real estate (see? The money-house thing was right.)
· The loan is usually paid back over a term of twenty five + years. Government plans and guidelines hint that they would prefer to make the maximum term somewhat shorter.
· Given the large amounts of money lent in a mortgage, and the extensive period of time over which they are paid back, the bank asks for security on the loan. This is almost always taken in the form of the property the mortgage is taken out to buy.
· As the above suggests, failure to maintain payments on a mortgage will possibly result in the bank taking ownership of the house via a “repossession” or foreclosure.
· The banks are then required to make the house ready for sale and take care of the sale themselves at a reduced price – therefore they prefer to look for a way of agreeing a reduced payment until the customer can pay the full amount.
At the end of the mortgage period, congratulations! You are the owner of the house you bought all those years ago. Prior to that it is part-owned between yourself and the bank, but as long as you choose a mortgage on which you can realistically keep up with payments there is no reason why you need worry. Common sense plays a huge part in picking the right mortgage, and as long as you apply your brain when choosing you should stand a good chance of keeping ahead of the game. Just make sure you have a fall-back if times get tough.