Mortgages For Dummies, Mortgage BasicsA mortgage is a type of loan used to purchase a house with. Most people do not have enough money to buy a house outright, so they put a small deposit down, borrow the money from a mortgage lender and make payments on the loan each month. The mortgage lender will then hold the deed to the property as security and allow the person taking out the mortgage to live in the property as if it were their own home while the mortgage is being repaid. There are many types of mortgages and re-mortgages available and which is most suitable varies greatly depending on the needs, the financial situation and the long and short term plans of the borrower. It is best to check with a financial adviser as to which type of mortgage is best for you. Mortgages generally require a deposit or down payment of around 20% of the total amount to be borrowed although 100% and even 110% mortgages are available, these are becoming less common in the current economic climate. A good rule when figuring the cost of a mortgage is that the repayments should not equal more than 28% of your total income. Mortgages are almost always secured by the property itself, therefore should you fail to meet the repayment you can lose your home. If equity exist in the property it can be re-mortgaged for a longer period of time reducing the monthly payments. The interest rate of the loan can be a fixed rate for the term of the loan or a variable rate based on the centralized interest rate. Mortgages can also be short or long term although 25-30 years is typical. Mortgages do vary greatly in price so shop around and seek professional financial advice before making a decision.
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