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Borrow

What is a mortgage?

  • November 25 2019
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Borrow

What is a mortgage?

By Louise Chan
November 25 2019

What is a mortgage? A mortgage is a property loan in which the purchased property is used as a security.

What is a mortgage

What is a mortgage?

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  • November 25 2019
  • Share

What is a mortgage? A mortgage is a property loan in which the purchased property is used as a security.

What is a mortgage

The borrower is required to pay the debt with a predetermined set of payments within an agreed period – typically 25 to 30 years. The condition of release for the title of the property is full payment of the debt plus interest.

But if the borrower defaults on the loan, the lender is legally allowed to seize the property.

How can I secure a mortgage?

You can go directly to lenders to get a loan for your first home.

Shop around with different lenders to find acceptable rates and terms if you want to take the direct route. Consider asking for a pre-qualification check if you want to know how much you can potentially borrow for a home loan.

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Once you find a favourable loan, take all the necessary documents to the lender to prove your financial capacity and history. The lender will assess how much they can lend you based on the documents you provided and a credit enquiry.

Likewise, you may engage the services of a mortgage broker who can help you process the property purchase.

Mortgage brokers act as middlemen between lenders and borrowers, and they usually know the current loan rates and deals that lenders offer. 

Likewise, brokers collect and process all the documentation on your behalf, so you’re sure that you’ve got the proper paperwork covered. But in exchange for their expertise, you’ll be paying for their services.

What is mortgage insurance and how can I avoid it?

More commonly known as lender’s mortgage insurance (LMI), this type of policy is designed to protect the lender in the event that you default on your loan.

LMI pays the lender the shortfall amount if you default on the loan and the selling price of your property isn’t enough to cover your loan amount.

Lenders typically require borrowers to pay for LMI when their loan-to-value ratio is greater than 80 per cent. This means you may avoid paying for LMI if you have a 20 per cent deposit on the property you wish to buy.

What is a mortgage?
What is a mortgage
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About the author

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Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

About the author

Louise is a content producer for Momentum Media’s nestegg who likes keeping up-to-date with all the ways people can work towards financial stability in 2019. She also enjoys turning complex information into easy-to-digest, practical tips to help those who want to achieve financial independence.

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