A mortgage is a loan that the borrower uses for the purchase of a house or a different form of real estate and agrees with the lender to pay the amount back over a particular period of time, usually in a series of regular payments. The property will serve as collateral to secure the loan.
Even a home is a goal for many people in the UK, it’s not easy and affordable to buy a home nowadays.
In order to buy a house, the majority of us will have to apply for a mortgage, otherwise, we will need to consider a rented accommodation for the foreseeable future.
A mortgage is a big life decision and should only be taken after much consideration.
To help with this decision we have listed a series of advantages and disadvantages:
Advantages:
- No rent anymore, ownership of your house- you can finally have full ownership and can arrange and design your house as per your taste and mood
- Affordable long-term mortgages – you don’t need to wait whole life to buy a house, you only need a small deposit and the rest will be paid monthly for 30 years or more like you would have done when renting, however now you are paying for your home that is even better. In the end, you will have your own house.
- Cost-effective Loan – generally the interest rates on a mortgage are lower than for other types of borrowing. Lenders can offer a big variety of mortgages, just need to find your specific mortgage that meets your needs and it’s ideal for your circumstances.
- Help to Buy – The government has introduced a number of schemes in recent years that are designed to make a mortgage more affordable for the public. E.g. Shared ownership, Equity loan etc.
- Easy Repayments– As mentioned above, the mortgage payment will be made in small amounts on a monthly basis, and quite often the could be a lower amount than a rent in the area.
Disadvantages
- Secured Loan – A mortgage is a collateral secured against your property so if you aren’t able to make the repayments, you could end up losing your home.
- Debt – A mortgage is a commitment to pay back within a certain period of time, including interest rate. Even over 25 years, you’ll be paying more back than you have borrowed.
- Interest rates–on mortgages interest rates are changing constantly and can increase or decrease. Sometimes this acts as an advantage or you could end up paying more than expected.
- Total repayment – The monthly amount may seem acceptable, however when adding the interest rate, the total amount you pay back over the years is huge.
- Additional fees – besides the interest you pay, it can be a surprising amount of other fees or taxes to pay, including remortgaging fees, valuation fees or conveyancing costs.
- Property value decrease – since the real estate market always fluctuates, it’s uncertain if a certain property will decrease or increase its value so you may find It difficult to sell after a period of time.
Now that you have all the advantages and disadvantages, you can consider if the mortgage is the right option for you.
To get the perfect mortgage offer, please contact us and we will be happy to help !
