In many countries, it is normal for home purchases to be funded by a mortgage. In countries where the demand for homeownership is highest, strong domestic markets have developed, notably in Spain, the United Kingdom, and the United States. A mortgage represents a loan or lien on a property/house that has to be paid over a specified period of time.
Most banks and building societies offer mortgages, as well as specialist mortgage lending companies. If you change lenders but don’t move home it’s referred to as a ‘remortgage’.
You can get a mortgage directly from the lender (banks, building societies and specialist mortgage lenders), or you can use a mortgage broker. You can buy based on ‘information’ only or get advice and recommendation on a mortgage that suits your particular needs.
Once you decide on the mortgage you want, do your homework. Different lenders offer different rates, points, and fees. Ask around and compare. Understanding the benefits of different mortgage offerings can be a complex process.
How do you figure it all out? Think of it as your personal guarantee that you’ll repay the money you’ve borrowed to buy your home. Mortgages come in many different shapes and sizes, each with its own advantages and disadvantages. Make sure you select the mortgage that is right for you, your future plans, and your financial picture.
In the last few years, mortgage lenders have been looking at affordability, rather than just salary multiples. A mortgage lender will look at all your regular incomings and outgoings and calculate how much they are prepared to lend. You may be able to get a bigger mortgage than you initially thought.
However many people these days have a bad credit mortgage rating, often due to circumstances beyond their own control.
You may need a bad credit mortgage (also known as impaired credit mortgages, or subprime mortgages) if you have been declared bankrupt in the past, have fallen into arrears on a mortgage or suffered other debt problems.
Or you may simply have a CCJ (County Court Judgement) against your name, due to non-payment of a utility bill, for example, which may necessitate a bad credit mortgage when you come to buy a property.
Before you are going to get bad credit mortgage, be sure that you know all these tips:
- Don’t borrow too much in the first place
- Allow for the fact that interest rates may go up
- Allow for the fact that your income may go down
- Fixed-rate agreements come to an end at some point
- Get rid of the millstone
- Do not sublet without permission
- Speak to the lenders
Remember that the two main ways to repay your mortgages or bad credit mortgages are ‘repayment’ and ‘interest only’. With a repayment mortgage, you make monthly repayments for an agreed period (the ‘term’) until you’ve paid back the loan and the interest.
With an interest-only mortgage you make monthly repayments for an agreed period but these will only cover the interest on your loan (endowment mortgages work in this way). You’ll normally also have to pay into another savings or investment plan that’ll hopefully pay off the loan at the end of the term.