A mortgage is a kind of loan that can be taken by people at the time of buying or refinancing a house. If a person doesn’t have much cash for a down payment then a mortgage helps them in such a situation. A mortgage is useful in the situation when a person is not able to pay the total cost of a house out of pocket. Home is a most expensive asset for everyone’s life. Sometimes people may invest their whole capital in buying a home. Owning the home is a matter of pride for everyone. It saves you from paying rent and provides security to your whole family. The one who is applying for a mortgage loan must qualify for the loan. There are some criteria set by the banks and other lenders companies and applicants must meet these requirements. Generally, the mortgage is given to those applicants who have a smart income and stable job. A credit score is a primary criterion when applying alone. You can check your credit score for free on several websites. Different lenders have set variant values of minimum credit score. According to FHA loan rules, a 580 score is necessary while other conventional lenders need at least a 680 score.
Mortgage loan: Before understand about mortgage we should know about the loan. The word loan is used to explain transactions related to finance where one party acts as a borrower and the other will be an investor. A borrower has to return the money back to the investor within a certain time period decided by the lender. A mortgage is a type of loan which is taken to finance a property. They are secured in nature and have other useful features that we should aware of them:
- Low fees: The mortgage loan is given to the people who fulfil all the required criteria set by the lenders. A mortgage loan has the advantage of a low fee charged on the loan amount. Those who have a good credit score can also take a loan on low interest.
- Split Interest rate: If you need to take the advantage of a variable rate home loan but have a fixed certainty, request the lender to divide your loan into a ratio that suits your wants.
- Additional pay-off: This is an important feature of the mortgage loan. When putting extra money from regular payments helps save you from interest and all-over repay the loan amount sooner.
- Flexibility during repayments: It is up to you how often you choose to repay the amount. Lenders give you the option to pay whether weekly, fortnightly or monthly instalments.
- Redraw facility and loan portability are other features of the mortgage loan.
Conclusion: A mortgage is a necessity for people who don’t have enough cash to buy a house. This loan helps them in purchasing by providing the required amount which the borrower has to repay to the lenders along with interest rate within a certain period.