Mortgage Bond & Home Loans

Mortgage and home loans is one of those things that most adults should go through at some point in their lives.  Home owners borrow money on their homes for a variety of reasons including making improvements or repairs, consolidating debts, paying off medical bills among others. In certain instances, there are benefits to using the equity of your home when borrowing money.  If you’re planning to build your own home, you may need to begin learning more about mortgage finance even before obtaining your house plans.

But before you go borrowing money on your home’s equity, it would be wise to take into account various factors so as to avoid paying more than you had planned. The last thing you want is to end up with a loan that costs too much, which not only causes your benefits to disappear, but your home as well.

Get the Best Possible Mortgage

Be a smart borrower and avoid getting trapped in a bad loan. Don’t allow yourself to be fooled by the loan offers that you see on TV or receive in the mail as these do not tell the full story. Even if you do not have financial problems to worry about, no one really wants to pay more than is required. Why pay a higher interest rate than you have to? Why pay unnecessary charges or fees? Whether your credit is excellent or poor, you deserve to get the best possible loan you can.

Beware of predatory lenders who target home owners facing financial difficulties. They seek out people who may be behind on property taxes or who need to fix their home up. Once they identify such people, the lenders will often use high pressure sales talk, charge outrageous fees, high interest rates and unfavorable repayment terms that the individual is unable to afford. Do not be tricked into taking out a home loan that you cannot afford to pay back. This is because when you are unable to make the payments, your home becomes at risk of foreclosure.

Shop Around for better Mortgage

Obtain a variety of offers and choose the loan that is best for you. To do this, you will need to:

• Consult multiple lenders, and not just the ones that call you, send you mail or knock on your door. Begin with multiple banks, credit unions, savings and loans and mortgage companies.
• Be sure that you understand the role of brokers, should you choose to use one. Brokers will charge you to find a lender, although they do not lend themselves. Some lenders will also pay the broker and thereafter pass their costs onto you in the form of a higher interest rate. Because you will be paying the broker, be it directly or indirectly, hiring a broker does not guarantee you the least expensive loan.
• Ask all lenders to explain the loan plan that they are offering in detail.
• If you’ll be building from house plans, get the different banks to see your plans and evaluate it to ensure that the amount you’re asking for will cover for the entire construction.
• Pay close attention to the fees. Keep in mind that the loan with the lowest monthly payments may not offer the best deal. It could have hidden fees that may end up costing you more.
• Consult a housing counsellor to discuss your options.

Close the Loan Deal Carefully

Once you have identified the home loan that you want, ensure that you obtain the deal that you have been promised. To do this:

• Read the loan papers carefully before signing them.
• Have a lawyer, housing counsellor or trusted friend assist you in going over the documents.
• Be certain that you understand exactly what the lender is offering, as well as what you will have to pay for it.
• Ask them to explain all fees to you.
• Ensure that all blank spaces have been filled in on every copy before you sign it.
• If what you have read in the loan papers is not what you expected or wanted, do not sign the documents. Be ready to walk out of the closing/ settlement in the event that you encounter unpleasant surprises.
• If you don’t understand anything at all, be sure to ask questions.
• Don’t be rushed – just take your time.

Understand Your Legal Rights and Make Use of Them

You have the legal right to know:

• The total costs of borrowing the money in terms of fees and interest
• Its annual percentage rate or APR
• The total number of payments and payment amounts
• The time period in which you have to pay the loan back
• The total amount that you have borrowed

Taking out your mortgage is a huge commitment financially. It is therefore important to understand exactly what you are doing as well as how the mortgages work. It is also important to ensure that you are able to afford the mortgage repayments.

What is a Mortgage Bond?

Mortgage is loans that you take out to purchase land or property. The loan is secured against your property, which means that failure to maintain the repayments on your mortgage could result in the lender taking your home back and selling it to repay the amount that is due. While the majority of mortgages may run for a period of 25 years, the term may also be longer or shorter.

Where to Obtain a Mortgage Bond

You may apply for the mortgage directly from lenders, including banks, building societies or specialist mortgage lenders. However, because they are only able to offer you the mortgage from their limited product range, it is important to have first done your research.

Alternatively, you may utilize mortgage brokers or financial advisers who may compare the various mortgages that are available to you and also enjoy access to lenders that do not directly offer mortgages to customers. Certain brokers consider mortgages from the entire market, while others offer products from a limited number of lenders. The broker should inform you of this when you first begin your dealings with them. The best thing is to have access to the widest possible choice.

When applying for a mortgage, be sure to go directly to the lender or utilize an independent mortgage broker for advice. When you do, they will ask you a variety of questions concerning the mortgage type you desire, its appropriateness for your needs, as well as how long the mortgage will last. Depending on the answers you provide, the mortgage broker or lender will recommend the mortgage that will meet your requirements and circumstances. Unless you are competent and confident in financial matters, your best bet is to take advice from these professionals. Not all lenders will accept a mortgage application based on any such information you have found yourself in newspapers, the internet or elsewhere, without the assistance of a mortgage expert or professional.

So before you go looking for a house plan, it may be wise and prudent to get clarity on the amount of money required to build a suitable home for you and your family.

Remember that banks, building societies or specialist mortgage lenders will also have a lending criteria. Before the lender agrees to lend you, they will thoroughly check whether you are able to afford your monthly mortgage repayments, and whether the property is worth the amount that you wish to borrow.

Deposits

Almost every mortgage product will require that you put down a certain amount of your own money in form of a deposit. This mortgage that makes up the difference will be expressed in the form of a percentage “loan-to-value” or LTV, which is expressed as a percentage of the property’s value. Generally, the higher the amount of deposit you are able to save, the lower the interest rate that you will be offered on the mortgage. Remember that you may have to save some of the money for obtaining house plans or the service of an architect – in the case of a building mortgage.

How to Repay the Mortgage

The mortgage comprises of 2 sections:

• The capital – the amount of money that you borrow
• The interest – the charge the lender makes until you pay back the loan

When taking a mortgage out, you will need to indicate how you intend to repay. This may either be through interest-only, repayment (capital plus interest), or a combination of these two. For an interest-only mortgage, you will have to prove that you can pay the capital back at the end of the term.

Mortgage Interest Rates

Mortgages are available with either variable or fixed interest rates. Fixed-rate mortgages mean that the repayments will remain the same for the specified time period, regardless of how the interest rates are behaving in the wider market. In the event that you have taken out a variable rate mortgage, the interest rates you have to pay could end up moving up or down.

How Much Can You Afford?

Before signing the contract, you will need to ensure that you are able to afford the mortgage repayments. Falling into arrears may make it difficult for you in future to borrow money. In the worst case scenario, you could very well lose your home by being unable to afford the mortgage monthly payments.

Lenders need proof of income as well as outgoings like credit cards and other debts, in addition to household bills, personal expenses and child maintenance when determining the amount to lend you. The lender will also check that you will be able to continue affording the mortgage repayments should interest rates rise. They will ask questions on whether you are aware of any changes in future that could impact your finances, such as plans on having a baby or to retire. Such events could very well impact the borrower’s ability o repay the mortgage in future.