So, you’re planning to purchase a home. But you are in this tight position where you can’t decide between buying it in full cash or getting a mortgage instead. Well, while it may seem so hard to arrive at a good decision, the answer is really very simple. Owning a house is a part of everyone’s dream, and for most, getting a mortgage is one way to achieve that.
However, having your own home is more than just having a roof on top of your head and a comfortable place to stay at night. You also have to buy furniture, purchase home equipment, and secure other documents that you probably need to pay for too. Even if you have enough funds to pay for all these, it is not always the best option. That is the reason why most first-time homeowners usually rely on getting a mortgage.
Believe it or not, there are so many advantages of getting a mortgage loan than you can ever imagine. If you’re thinking about getting one, but you don’t know where to begin, you’ve clicked the right article to read. Here are some of the mortgage loan basics that you have to know before getting started and living the dream in your home.
What is a Mortgage?
Simply put, a mortgage is a type of loan agreement that is used to buy a home property. With a mortgage loan, you can borrow a considerable amount of money from a lender to finance you with what you’ll be needing to buy a home and pay it back over a certain time. Of course, this type of agreement also gives your lender the legal rights to repossess the property in case you fail to pay your dues. You also need to meet specific requirements before you can apply.
While it may seem a little discouraging, the good thing is that you can work with a mortgage broker to help you. Now that the market for mortgages has become competitive, their role has become more critical. It’s always good to hire a mortgage broker near you. For example, if you’re in Hervey Bay, Australia, you can work with a reliable Mortgage Broker Hervey bay has to offer.
Types of Mortgage Loans
A mortgage loan comes in various types, and it is best if you are familiar with at least the most common ones before you take out a loan. This is because other types have additional requirements, and you need to ensure that you qualify first. If you’re not sure of what type you’d like to apply for, it might bring you trouble instead of help. Thus, here are some of the most basic types that are available to borrowers.
- Fixed-rate – this mortgage loan is also known as the traditional mortgage. With a fixed-rate loan, the interest rate for your loan will stay the same throughout the entire term. This also applies to your monthly payments. In short, there will be no increase or decrease in your payment to your lender. The only problem with this is that you might have to pay more interest if you have a longer-term loan.
- Adjustable-rate – this type of loan is just the opposite of a fixed rate. Also called ARM (adjustable-rate mortgage), your interest rate will be fixed initially, but it can also change periodically based on market conditions. Usually, the first few years have a low fixed rate, making it affordable, but it may also increase in the long run. This type is ideal if you don’t plan to stay in your home for a long time.
- Government-insured – this type of loan is just what it says: a loan insured by the government. Government-insured loans are a good idea, especially if you don’t qualify for a conventional loan. In addition, you don’t need to pay a larger down payment. However, you may have to prepare a lot of documentation, depending on the loan type, to prove that you are eligible.
Advantages of Getting a Mortgage
While there has been a particularly negative light about getting a loan, in truth, there are so many advantages that a mortgage loan offers. For one, taking out a mortgage loan allows you to invest your money elsewhere instead of locking it all up in a big purchase such as a home. Another thing is that generally, a mortgage loan has a lower interest rate compared to other types.
But probably the most significant advantage of getting a mortgage loan is that it can actually help you improve your credit score. Most credit reporting agencies consider home loans as a productive form of debt that effectively improves a borrower’s credit profile. If you are able to make payments on time, this will reflect on your profile, thus improving your credit score.
A home mortgage gives a range of benefits than you could imagine, and while it is overwhelming at first, you don’t have to worry too much. As long as you know even the most basic of a home mortgage, you can surely land a good deal with a lender. But of course, you can always ask the experts to handle the negotiations for you, instead.