Beginner’s guide to mortgages

If you have sufficient means to purchase a house for cash, then you certainly can afford to buy one now. Even if you can’t pay in cash, most experts would agree that you can afford the purchase if you can qualify for a mortgage on a new home. A mortgage is a type of loan that is secured by real estate. When you get a mortgage, your lender takes a lien against your property, meaning that they can take the property if you default on your loan. Mortgages are the most common type of loan used to buy real estate—especially residential property.

Mortgages are considered relatively safe loans for lenders to make because the lender can take the property if you don’t pay. As long as the loan amount is less than the value of your property, your lender’s risk is low. Even if you default, they can foreclose and get their money back.

Where to get a mortgage

You can apply for a mortgage directly from a bank or building society, choosing from their product range. You can also use a mortgage broker or independent financial adviser (IFA) who can compare different mortgages on the market. As well as mortgages which are not offered directly to customers. Some brokers look at mortgages from the ‘whole market’ while others look at products from a number of lenders. They’ll tell you all about this, and whether they have any charges, when you first contact them. Taking advice will almost certainly be best unless you are very experienced in financial matters in general, and mortgages in particular. It is sometimes possible to choose a mortgage without receiving advice – this is called an execution-only mortgage. These are offered under limited circumstances.

You’d be expected to know:

  • What type of mortgage you want.
  • Exactly what property you want to buy.
  • How much you want to borrow and for how long.
  • The type of interest and rate that you want to borrow at.

The lender will write to confirm that you haven’t received any advice and that the mortgage hasn’t been assessed to see if it’s suitable for you. In some cases, you might need to confirm that you are aware of the consequences of taking out a mortgage without receiving advice, and that you’re happy to go ahead. If for some reason the mortgage turns out to be unsuitable for you later on, it will be very difficult for you to make a complaint. If you go down the execution-only route, the lender will still carry out detailed affordability checks of your finances and assess your ability to continue to make repayments in certain circumstances.

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