Ah, a mortgage. Few economic contracts are so constantly heard of, yet so poorly understood. We all know they’re used to get houses and, judging from TV shows, we also know they take long to pay and stress you out.
In theory, that should be enough. A longer description could simply say “A mortgage is a loan you get from the bank to buy a house. Essentially, the bank buys the house and lets you live in it while you pay for it. Once you’ve paid it all (as in, the mortgage,) the house is yours.”
But while that description does get the gist of it, there’s more. There’s always more. There are details, tricks, and small print to take care of. Here are some things you should also know before getting one.
Because if you don’t fulfill these there’s no way you’re getting one. In general, the amount of money a bank will be open to lend you via a mortgage will be directly tied to your credit score and your monthly finances.
A person with really bad credit score won’t even qualify for one, while people with a decent score but low monthly earnings won’t be able to apply for a mortgage on a mansion.
The types of mortgage your bank offers
Not all mortgages are the same. The differences between them even go beyond just the numbers, since numbers are something you can actually negotiate.
The type of mortgage refers to the agreement that will rule the whole process. One could divide it in two large groups, being fixed and adjustable-rate mortgages. Fixed rate ones have set monthly payments and interests, while adjustable ones are often recalculated based on several indicators.
There’s more, however. The mortgage you get will often depend on what you’re purchasing real estate for (mortgages for a personal home offer lower interests than mortgages for rentals, or for second properties) so making it clear what you want the property for can go a long way.
If you can’t pay your mortgage it’s not the end of the world – as long as you act quickly
Second mortgages are even more misunderstood than regular ones. The wording itself for the term doesn’t even make much sense, leading homeowners to be puzzled about them.
The actual term behind the “second mortgage” nickname is refinancing, which is what happens when for whatever reason your economic situation changes and you find yourself unable to make your regular mortgage payments.
It is, in essence, a renegotiation of the mortgage contract, usually made to help you keep your house because, believe it or not, banks usually aren’t interested in keeping real estate properties. The trick to get a good refinancing deal is to act quickly.
Don’t wait until you have several months of unpaid bills and an eviction order. The sooner you act, the better a deal your bank will offer you. Many people fail to explore making hay while the sun shines. But, it is the better route to take in this scenario.
Shop around before committing
Don’t just take the first deal you’re offered, or go with the first bank or financial institution you see. Ask around – ask friends and coworkers about their experiences, but also inquire in different places in your own.
This is important because different institutions will offer you different mortgage terms, and some will be better suited for you than others – in fact, some might even be flat-out superior than others by offering lower interests or smaller payments.
Just as you wouldn’t just buy the very first house you see, don’t take the very first mortgage you’re offered. Wait a bit, think it over, and see what else others can offer. The more the merrier applies in this case and you lose nothing for nosing around for the best deals.
The present depressed economic state of many nations holds some promise to get a good bargain for mortgage in most cases. Though many people are just angling to survive, there is room to go beyond just that.
So, if you have got some mileage, go ahead, and apply the tips above to strike a deal. When the storms of the present settle, you will enjoy the bottom-line.