A mortgage in basic term is a loan
given an individual or corporate body by a financial services provider, usually
a bank or building society for the specific purpose of purchasing a property.
This type of loan is called a secured
loan because in essence you put down the property as security. Your bank or
building society lend you the money on the basis that you pay back over a
certain number of years ( depending on the agreement you strike) and if you are
unable to keep up with the repayments as agreed, then your lender has every
right following a legal process to repossess the property and sell it in
order to get back the money borrowed you.
Committing to a mortgage is a very huge
responsibility to take on and before you take the plunge bear in mind that the
experts suggest you borrow wisely. This means that you should realistically
work out how much you can afford to put into mortgage repayments now and in the
future.
The base rate (the rate at which the
bank of England lend to financial institutions) is at a historic low only 0.5%
at the moment. How much your bank or building society charges for the loan made
to you is a function of this base rate and at the moment this low interest rate
makes borrowing cheap and thereby attractive. As you borrow ask yourself what
happens when the base rate rises and consequently your lender increases the
interest charged making your repayments higher. Would you still be able to
afford your loan without a pay rise which is not guaranteed.
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