Guide to Mortgages

A mortgage is a loan that is guaranteed by a property. At its most simple that means, if you can't pay back your loan the lender can force you to sell your home so they can get their money back.

Typically you can borrow three to three and a half times your income, or two and a half to three times the joint income of you and your partner. These are known as income multiples.

The amount you can borrow will also depend on the value of your home. Most lenders will allow you to borrow up to 95% of the value of a property. The loan rate is set by the lender, and is called the standard variable rate (SVR).

Always shop around for the best rates. However you must be careful to ensure you are comparing like with like. To do this check the annual percentage rate (APR) of the loan. You also need to bear in mind that the interest payments in respect of fixed rate mortgages can rise steeply once the initial 'fixed' period ends. Therefore your planning should always include the possibility of sharp changes to future interest payments.

There are two basic species of mortgage, repayment and interest-only. The option you choose is determined by the way you want to repay your loan. Depending on the type of mortgage you choose, your monthly repayments will be made up of either capital and interest or interest only.

A repayment mortgage requires you to pay back both interest and loan capital, so at the end of your mortgage period there is no money owing. With a repayment mortgage you make the repayments monthly for an agreed period (the 'term') until you've paid back all the loan and the interest. A typical term is initially 25 years, although it can be any amount of time ? the shorter the term the higher your monthly payments but the less you'll pay overall.

An interest-only mortgage allows you to repay just the interest on your loan, but you have to take out an investment that will mature to pay off the outstanding amount. With an interest only mortgage you'll normally also have to pay into another savings or investment plan that'll hopefully pay off the loan at the end of the term.

A lender might require you to take out life insurance to pay off your mortgage should you die. You can choose from basic 'term assurance' with low monthly payments that stop when your mortgage term ends. You can also get insurance to protect your income or just your mortgage payments if you become ill or disabled, or lose your job.

If you cannot meet your mortgage payments you should contact your lender as soon as you realise that you have a problem. Although your mortgage is secured on your home, lenders see repossession as the last resort: they stand to make more money from your mortgage than the sale of your home.

Lenders will work out a plan with you to reduce your payments for a time or stop them temporarily, and work out a new term for your mortgage. It is wise to remember that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.

You may freely reprint this article provided the author's biography remains intact:

About The Author
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

---

How To Find A Mortgage With Bad Credit

Shopping online for mortgages ought to be trouble free, even... Read More

Applying Online For A Home Loan Can Give You an Instant Approval

"Instant Approval For Home Loans" is a common refrain for... Read More

How easy is it to get a Commercial Mortgage in the UK?

As is the case when applying for any mortgage, be... Read More

Home Equity Line of Credit ? Great Idea for Rainy Day Emergencies

Most Americans tend to live on a paycheck-to-paycheck basis, and... Read More

Mortgage-Refinance Loan Can Put Cash in Your Pocket

Do you need cash? Here's a mortgage for you. If... Read More

Refinancing Your Home Mortgage - Get Up To 125% Cash From Your Homes Value

With the low interest rates being offered by lenders today,... Read More

Remortgage ? When Monthly Mortgage Payments are Touching New Heights

Current economic scene has hinted towards a fall in the... Read More

Fixed Rate or Adjustable?

Fixed rate or adjustable rate mortgages are two choices of... Read More

PayDay Loan Online - Quick Cash Advance Loans Online Are Very Convenient

Getting a quick cash loan, cash advance or payday loan... Read More

Reverse Mortgages: When Is One Right For You?

How do you know if a reverse mortgage is right... Read More

Finding the Best Homeowner Loans for Your Money

Looking for the best homeowner loans can be stressful, especially... Read More

Understanding Mortgage Points

When a mortgage broker asks a borrower to pay points,... Read More

Why Get Pre-Approved For A Mortgage?

One of the most important steps in the home buying... Read More

Secured Lending - a Guide to Releasing the Value in Your Home

The recent boom in house price values have made some... Read More

Using a Home Mortgage Calculator

There are a variety of tools online that you can... Read More

Reasons To Get A Home Equity Loan

Using a home equity loan really depends on what your... Read More

Refinance After Bankruptcy

Refinancing your mortgage after bankruptcy is actually the same as... Read More

Mortgage Prepayment Penalties - Just Say No

One of the most common terms found in a new... Read More

What is a Capped Mortgage?

A capped mortgage is a variable rate mortgage with a... Read More

Zero Down Payment Mortgage ? Can It Be Done?

"I've been renting for years now; I've always paid my... Read More

Refinance Your Second Mortgage

A 2nd mortgage is a secured loan on your property,... Read More

Understanding Mortgage Basics

As common as mortgages are, there are a surprisingly large... Read More

Guide to Home Equity Loans

Here is a useful guide to home equity loans. A... Read More

How a Commercial Mortgage Can Help Your Business

A commercial mortgage or commercial remortgage is a business loan... Read More

Should You Get an Interest-only Home Mortgage?

Before you consider taking out an interest-only mortgage, you should... Read More

Tips for First Time Home Buyers

When looking at tips for first time home buyers, you've... Read More

Home Loans and Mortgages ? The Selection Can Be Bewildering

For years, when someone wanted to purchase or refinance a... Read More

Home Loan Applications Made Easy

You have finally found the home of your dreams. You... Read More

High Risk Home Mortgage Lenders Online

Online high risk home mortgage lenders specialize in offering loans... Read More

Be Prepared when Seeking a Mortgage

When you're looking for a mortgage, whether it's a first... Read More

Finding the Best Home Improvement Loans

When the time comes to do work around the house,... Read More

A Home Loan Can Help You Own Your Dream Home

Owning your dream home need not just be a dream.... Read More

Home Buyer Beware ? Know the Signs of Real Estate Market Trouble

Lots of articles have appeared recently about the booming real... Read More