Mortgages

What is the biggest financial undertaking in most peoples’ lives? Think about it for a moment. You got it yet? That’s right–a home purchase. With the average house costing hundreds of thousands of dollars, the are a stark few people who can afford to buy a property through their own private funds alone. For the vast majority of buyers, funds must be raised through borrowing. Typically borrowing is raised through a bank, which will issue funds in the form of a mortgage. The mortgage will be an agreed amount, which can be up to the full value of the property, although this is rare. The mortgage will be paid back by the borrower over an agreed term, which in many cases starts at about 25 years–hence the name, which translates to death pledge.

The funds will be subject to an interest rate, which varies from time to time, lender to lender. This interest rate can also be renegotiated at various times during the course of an average personal mortgage… so it makes sense to review it often to get the best deal possible.

All new mortgage applications are subject to a credit check to assess the trustworthiness of the borrower. A bad credit rating will prevent an individual from acquiring a mortgage (and any other form of credit arrangement for that matter). The cause of bad credit: There are many reasons why one might have bad credit. At the top of the list is failing to pay other credit agreements–like credit cards–on time. Other reasons include not having built up a credit rating. This simply means that financial institutions do not have a record of what you have borrowed in the past… so they don’t know how you’ll react in the future. This is a relatively easy fix as it just means the individual has to acquire and payoff some lower-level credit agreements, before being accepted for a mortgage.

Once a property has been arranged, the lender will take–by direct debit–monthly payments. Should the borrower wish to move property, they are free to do so. This process involves finding a new property, having an offer accepted, informing the bank of the move, ensuring the current mortgage covers the new purchase prices, making adjustments if it doesn’t, and ultimately moving.

In most cases, the transaction is seamless. However, there may be instances where the new property’s value exceeds what the borrower can afford. In this case, the lender will deny the application for additional funds and the sale of the house falls through. As you can imagine, this is undesirable… so we strongly recommend that you always get in touch with your bank to understand exactly how much can be borrowed, before committing to a home move.