UK Mortgage Advisors

Mortgage :- An Introduction

What is a Mortgage?

So, what is a Mortgage?

A Mortgage in its simplest definition is a legal and monetary agreement or contract that uses property (a house, flat or other suitable living accomdation) as collateral to secure payment of a debt. A UK mortgage is quite simply an amount of capital borrowed by a homeowner from a mortgage lender such as a bank or a broker, in order to purchase a property.

The property itself is used as security against the mortgage loan, so if you failed to keep up the repayments on your UK mortgage then your home would be at risk. Once you have been accepted for a UK mortgage you will receive the requested amount of capital which will enable you to purchase your desired property and you will repay the mortgage lender over an agreed period of time. You will agree to make payments, usually every month, in order to repay your mortgage. At the end of the mortgage term you will have paid off both the capital that you originally borrowed and the interest that was charged on the mortgage, and you will finally own the property outright.

Depending on the mortage taken out by the borrower, the mortgage lender, normally a bank or building society, buys the property at its buying price and the borrower(the owner of the property) then pays back through installments (along with all of the fees and interest that are included with it), over a number of years the money it cost the bank or building society to buy the property in the first place. As a result, this legal agreement means that when a mortgage is on a house or flat, the mortgage lender can take possession of the house if the borrower stops making payments on their accommadation to the mortgage lender.

Parts of the mortgage

The mortgage payment is made up of: -

1. Down payment- This is the lump sum you pay upfront that reduces the amount of money you have to finance on the mortgage. You can put as much money down as you want, or you can sometimes pay as little as 3 to 5 percent of the purchase price. The more money you put down, though, the less you have to finance and the lower your monthly mortgage payment will be. "

2. Principal - This is the total amount of money you are borrowing from the mortgage lender (after you've made your down payment). It is the amount of money you are financing on your mortgage. "

3. Interest - This is the money the mortgage lender charges you for the mortgage. It is a percentage of the total amount of money you are borrowing on the mortgage. "

4. Taxes - Money to pay your property taxes is often put into an escrow account, meaning that the money is placed in the hands of a third party until it is time to pay or certain conditions are met. A portion of your property tax is added to your monthly mortgage payment and held in escrow until it is due. "

5. Insurance - There are several types of insurance that can come into play when you get a mortgage. You'll have hazard insurance to protect against losses from fire, storms, theft, etc., and if your home is in a flood risk zone you will have to get flood insurance. Unless you have at least 20 percent equity in your home, you'll also have to pay private mortgage insurance (PMI). This can sometimes be pretty expensive, so it makes sense to put as much into your down payment as you can. (Equity is the portion of your home's value that you have already paid for.)

Period of paying off a Mortgage

Mortgages are typically paid off in incremental payments that gradually chip away at the principal of the mortgage. This is called amortization. The portion of your mortgage payment that goes to pay the interest is much higher than the portion that goes to the principal -- at least for the first several years. These mortgage payments are precisely calculated and scheduled to pay off the mortgage in a specified period of time.

Mortgage advisor

A mortgage advisor is a person who sells, helps, gives advice and information to people who are seeking and finding any type of mortgage. A mortgage advisor offers advice on what mortgages are the best for the individual needs/requirements and 99% of banks and buildings societies who now sell mortgages, now have specialist trained staff who are employed to offer support and advice to people who are seeking a mortgage.