Things To Consider When Getting a Mortgage



Posted: Tuesday, April 25, 2006

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no deposit mortgages

Buying your home is a major financial commitment. Apart from paying for it (upfront in cash or with a loan), you will then have to maintain it. As explained above, if you buy a flat on a long lease, you will also have to pay service charges.

Unless you are going to buy your home with cash, you will need a mortgage (i.e. a particular kind of loan). There are various kinds of mortgage which your bank or building society can tell you about. An independent mortgage adviser may also be able to help. See the free Financial Services Authority (FSA) guide to mortgages for information on the different types of mortgage available - call the FSA Consumer Helpline on 0845 606 1234.

You will have to repay the mortgage, plus interest, by instalments (usually, monthly ones). Normally, mortgages have to be repaid over a period of 25 years, but the period can be shorter. Flexible mortgages are available which allow you to vary your payments (subject to rules set by the lender). The lender may not be prepared to lend you the full amount that you need to purchase your home. If so, you will have to pay the rest from your savings. If you sell your home later, you can use the money from that sale to pay off the rest of your mortgage. But remember that the value of homes can go down as well as up and in some cases people find themselves in 'negative equity'. This is when the mortgage on your home is larger than the amount for which you are able to sell it.

If you can't keep up the repayments on your mortgage, the lender may go to court and ask to take over your home. The council does not have to give you another tenancy if you lose your home in this way.

If you lost your income through unemployment, you would not normally receive Income Support for the first 9 months. The Income Support you would be entitled to claim would only be for the mortgage interest payments, and may not cover the full amount.

How much would I need to borrow? The amount you need to borrow depends on:

· the full market value of your home · any discount you may be entitled to less · any cash you can put towards the purchase The basic decision you have to make is how you're going to repay the money you've borrowed.

Don't be confused - there are only two basic types of mortgage: · repayment , where the capital is re-paid gradually over the term of the mortgage · interest only , which, as the name suggests, is where you only pay the monthly interest of the mortgage.

However, your lender will stipulate that you set up a repayment vehicle, such as an ISA, an endowment policy, or a pension plan which, when it matures, can be used to pay off the outstanding debt. If you take out this type of mortgage, check regularly that you're on target to pay off the mortgage when it's due. If not, then increase your savings.

Finally, take time to read all the small print. Always ensure you know what you're buying and check dates for when any discount or fixed rate runs out. And be particularly careful to check for penalties for paying your mortgage off early, moving to another provider before the tie-in period expires, or for missing a payment.

the authour of this article is : lee johnson who is the internet & marketing manager for no deposit mortgages

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