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Mortgages.
The majority of first-time buyers and many individuals on the property ladder require a mortgage to purchase a home. The problem with mortgages is that they can seem VERY confusing. Continue reading to find out more about mortgages and the jargon that’s associated with them.
- Principal: The principal is the amount of money that you borrow from your lender to purchase a property.
- Interest rate: The interest rate is the cost of borrowing that money from the lender. The interest is typically expressed as an annual percentage rate, also known as an APR.
- Amortisation: Amortisation is the process of paying off the mortgage over time through regular payments. The payments are typically divided with a portion going towards the principal and the remainder going towards interest.
- Term: The term is the length of time over which you will make payments on the mortgage. Typical mortgage terms are 15 to 30 years.
- Down payment: A down payment is a portion of the purchase price that you pay upfront. It is typically expressed as a percentage of the purchase price. The larger the down payment, the lower the loan amount and monthly payments.
- Private Mortgage Insurance (PMI): If you make a down payment of less than 20% of the purchase price, you may be required to pay PMI. PMI is the insurance that protects the lender in case you default on the loan.
- Closing costs: Closing costs are fees that are associated with the purchase of the property, such as appraisal fees and legal fees. They are typically paid at the time of completion.
- Fixed rate vs variable rate mortgages: With a fixed rate mortgage, the interest rate remains the same for the life of the loan (or for the fixed term). With a variable mortgage, the interest rate can fluctuate over time.
It is important to understand these concepts before taking out a mortgage so that you are able to make an informed decision and choose the best option for you and your financial situation. There are many financial and mortgage advisors across the UK that will be more than happy to work with you to provide all the information you require whilst finding the most suitable mortgage option for you.
If you have any questions on mortgages, finding a financial advisor or anything else property related, please do not hesitate to give our team a call on 01768 639300 or visit our Get in Touch page.