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A Beginners� Guide To Mortgage UK
The decision to mortgage house does not in any way show that you are not emotionally attached to your house. On the other hand, it was your concern for the house that restrained you from selling it. As compared to the sale of house, mortgage is a much better option. You continue holding the house and living there for as many years as you want.
The only problem however is that the loan provider has kept lien on home to himself, and keeps using it as a stick to exhibit what can be the consequences of being irregular on the mortgage repayments. In the worst of circumstances, when the borrower has not repaid the mortgage, the loan provider has the right to repossess home.
What can the borrower do in such circumstances? There is not much to do once the loan provider has made up his mind to repossess home. Recovering home from the loan provider in such cases will be much more costly.
A more effective solution to the problem would be to go by the rules. Continue paying as much has been decided between you and the loan provider, and try to be disciplined in repayments.
This isn�t as difficult a solution as most of us will think. The following illustration would make things clearer. For a person who earns a monthly income of ₤100, it will be difficult to pay ₤30 at a time. However, when he is required to pay ₤1 over a period of 30 months, it will be relatively easier. The monthly installment method of repaying mortgages uses the same concept. The borrower will be required to pay a monthly installment every month. This goes towards amortising the mortgage balance over the specified term.
There are other methods for paying off the mortgage too. Among the alternative methods, interest only mortgage repayment is the most important. An interest only mortgage repayment method allows borrower to pay only interest on the mortgage. Thus, at the end of the term the balance remaining unpaid is the amount actually taken. How the balance of the mortgage will be repaid at the end of the term will further categorise mortgages into pension mortgage and endowment mortgage.
Pension mortgage employs the pension for disbursing the unpaid mortgage balance. Normally 25% of the pension is available tax-free to every borrower. Pension is the result of contribution of the employer and the employees over the work life of the borrower. Thus, utilizing pension for repaying mortgage will not be much burdensome to the borrower.
Endowment method of paying off mortgages will utilize the amount saved by borrower in an endowment policy over a period. Since, the endowment policy will be invested in shares and stocks; there are chances of the endowment fund growing profitably. Similarly, there are chances of the endowment fund not faring properly and resulting in loss to the borrower.
Mortgages are commonly classified into three, depending on the borrower and the purpose for which it is being used. A first time buyer mortgage is for the borrowers who are buying house for the first time. Mortgage terms may differ for this kind of borrowers in order to incorporate the relative weakness of their finances. These borrowers become eligible for discounted rates of interest.
Another classification of mortgages is buy to let mortgage. Buy to let mortgage, as the name suggests will be for borrowers who already have a home and they want to use the new home for letting out on hire. A distinct feature of this type of mortgage is that the borrower will pay monthly installment through the rental received.
Finally, there are council right to buy mortgages. Council right to buy mortgage are for the people who have been living as council tenants. They have got an opportunity to buy the council home. Because of the lack of personal resources, they use the council right to buy mortgage.
Because of the home serving as collateral, interest rate is at an all time low on mortgages. Always seek a mortgage from prestigious loan providers in the UK. The quality of the mortgage deals arranged by them is excellent. Also, there is no fear of several additions to the mortgage in the form of extra fees.
We have always stressed on the need for good decision making on mortgages. Good decision making ensures that mortgage is safely repaid and the worst fear of losing home on repossession never comes true.
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