How Do They Work, and Who Gets One?
As I’ve said, mortgages are loans, but they’re a specialist type of loan. Whilst a loan can be used as a cover-all term for any financial transaction between multiple parties where one ends up paying the other back, a mortgage is what’s known as a ‘secured loan’. Depending on the type of loan, if you fail to pay back the money by a certain time, doesn’t necessarily mean you’ll have further expenses to pay. For example, if you were to loan your friend some money, and they struggle to pay you back. You wouldn’t demand it by the end of the month, instead, you might say something like “that’s fine, pay be back whenever you can”. This loan, and many others work similarly to this, but not secured loans. Secured loans essentially mean if the payments aren’t made on time, then something else can be taken instead, whether it’s as payment or just as an incentive to get you to pay. When it comes to mortgages, what they can take is your property, and, if needed, then they might end up selling the property to make up for their financial loss.
The whole point of a mortgage is to give you enough money to buy property or land when you don’t have the funds to buy it outright yourself. Because it’s a loan, it has to have a borrower and a lender. In this scenario, the borrower is you, and the lender is the bank. They give you a specific amount of money to buy whatever it is you’re trying to buy, whether it’s land, a house or a flat, but they also give you a set time when the money has to be paid back by, with interest. Interest essentially acts as a meter to see how much borrowing actually costs. As a borrower, your interest rate is how much you’re going to be charged for borrowing money, shown as a percentage of that loan. But don’t worry. Because this payment that you need to pay back, takes place over several years. So, who gets one?
The answer, anyone. Sort of. Before you can get a mortgage, there is an application process to go through, understandable given that large sums of money are often involved, but anyone aged anywhere between 25-40 are generally accepted for getting mortgages, but they’re not the only ones. Provided you’re accepted, anyone, within the legal requirements, can get a mortgage. More often than not it’s out of necessity, and a helping hand to get you on the property ladder, but people who can buy property outright, can get mortgages too. Having a mortgage can allow for more expenses to be paid for. Investments can be made, essentially you can gain a greater sense of financial security. But like I’ve said, it all hinges on the application. So, what’s in that?