Mortgage advice

A mortgage is an arrangement by which the lender gives you money to acquire real estate (the home) and pays you regular payments on the principal until the obligation has been fully discharged. Many kinds of mortgages exist, and the type you choose will depend on a variety of factors. For instance, when will the repayment be complete? What will the final payment be? Will there be an early redemption penalty? How much of the loan to value ratio needs to be covered before banks will consider a mortgage application? It’s important to understand the terms of your mortgage. So let’s consider the basics here. What is a mortage?

In layman’s terms it is a loan that you take out to finance the purchase of your home or investment property (house, villa, apartment). In other words, a mortage is a debt secured against your property. To secure the debt against the property you will be borrowing, a bank or mortgage lender will put a charge on your new home – this means the bank can repossess the property if you do not keep up your repayments on your mortage agreement. This will be repaid when you sell the property if the loan is fully cleared on completion.

How do I qualify for a mortage?

There are three requirements that banks and other mortgage lenders look at when considering an application: income and expenditure, current debts and potential debt to income ratios. These are common yardsticks lenders use to determine whether you can afford to take out a mortgage. For example, if you have a low income but are planning on buying a more expensive house or one with large land than your income can support then the banks may refuse your application. Also if you have a relatively lower credit score, which means you are less likely to be able to pay your debts on time, you may have a harder time securing finance for a mortage. Having too high a debt to income ratio can also mean that you are unlikely to get a loan as you may not be able to afford the payments. Banks will also require proof of identification and contact details (such as social security number and address) so that they can check that you have a clean credit history and there are no loans already secured against your property

Mortage Tips:

• 1. Have a realistic idea of what you can afford to borrow and stick to it – don’t stretch yourself too thin and think you can afford a bigger home than you really can.
• 2. Try and keep your debt to income ratio as low as possible – keeping this low will help the bank feel that you are more able to afford the payments on the mortgage and give you a better chance of securing a home loan.
• 3. Get pre-approved for a mortgage – this will help you understand the bank’s requirements and price range so you can plan your search more efficiently and also ensure you are not wasting your time visiting homes out of your reach.
• 4. Verify all information you provide to the bank – make sure that your name, address and other personal information that you supply is 100% accurate – once the bank has found this information to be incorrect it will affect your credit rating and make it more difficult for you to secure a mortage in the future