What is a mortgage?
It may seem like a simple question to many but to others who have never had a mortgage before it is an important one to know. Buying a property is a big investment so it is always best to understand what a mortgage is and how it works in relation to you before you start.
A mortgage is a loan taken out from a bank or building society (known as the lender) specifically to buy a property or land. Interest at a specified rate will be added by the lender and you will make a regular monthly payment each month to pay both the borrowed amount plus the interest added. The standard amount of time to borrow this on a loan is over 25 years but, depending on your circumstances and how much you can afford to pay this can often be made a shorter or longer length of time. Interest rates can be fixed for a set amount of time or be variable, but you will be advised what the rate will be before you take out the loan.
The loan is ‘secured’ against the property until the full amount is paid off – this means that if you cannot keep up your repayments, the lender can repossess (or take back) your home and sell it, so they get their money back.
You will need to save at least 5% of the purchase price of the property you wish to buy and then you will borrow the rest on your mortgage. You will also need to be aware of other fees which may be incurred during purchase which will be them amount you need to save on top of the deposit amount.
If you would like to find out more information then please look at our other first-time buyer guides and get in touch via phone or email and we will be happy to help.
‘Your home may be repossessed if you do not keep up repayments on your mortgage’
17/04/2023 This information is correct at the time of publication but may be subject to change.