Things to think about before taking out a mortgage
Mortgages enable people to buy homes and change their lives. I remember as a child being intrigued by the word and wondering what it meant. There’s an argument for financial education in schools and at home straightaway. So I am doing my small bit and outlining what to think about before you take one out. The more clued up you are in advance the less likely it is that you will have a mis-sold mortgage situation. Here are the key things to think about before taking out a mortgage.
Definition of a mortgage – things to think about before taking out a mortgage
A mortgage is simply a loan taken out to buy a property or land. The loan is secured against the value of your home until it is paid off. As a former debt counsellor, it used to surprise me how many people thought the security was theirs when actually it is the lender’s protection. It means that if you do not make the payments, your home can be repossessed.
Affordable mortgages
I am so pleased that people buying homes are now asked to look at how much they can afford. When I was counselling people in financial crisis, it was obvious that so many had over-stretched leading to the inevitable collapse further down the line. The Money Advice Service has an affordability tool so you can work out what is realistic for your individual circumstances.
If you are a first time buyer, really reflect on the other costs involved in owning a home from council tax, fuel and water bills, insurance and maintenance. You can also check out Mortgage Pre Approval: The Ultimate Step-by-step guide for 2022.
What lenders need from you
Lenders need to trust that you want to make the payments and can do so. That is what you would want if you were lending money at a friend or family member too. It makes absolute sense. So get together details of your income and expenditure and outline any debts you have too.
Where can you get a mortgage?
Banks and building societies offer a range of mortgages. The alternative is to seek the advice of a mortgage broker or independent financial adviser. Even if you have a poor credit history, with a bit of help you should still be able to find a mortgage to suit you. You can find out more here about a company that specializes in finding mortgages for people with poor credit history. They should tell you about their charges and whether they look at the whole market or just at a specific range of lenders.
It is possible to take out an interest-only mortgage but this does come with risks attached and may be the very thing that leads to you having to make a mis-sold mortgage claim in the future.
Conclusion
Very few of us are financial experts and the purchase of any home is a big one. Take good advice and do your own research too before committing to a loan that usually takes decades to clear. I hope this post on things to think about before taking out a mortgage helps you.
.
A mortgage is something you really have to research properly.
My teen was actually being taught about them in school last week. They have been having a lesson once a week about managing money. #MMBC
Kate, I think most people getting their first mortgage have no idea about the process until they’re in the middle of it. Definitely a good topic to blog about!
Getting a mortgage was one of the most stressful things we have gone through as the paperwork was done incorrectly! I’d advise you shop around for an advisor! Thanks for linking up with #globalblogging