What is a mortgage?
According to the Consumer Financial Protection Bureau(USA), A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you don’t repay the money you’ve borrowed plus interest.
If you’re looking to borrow money and own a property, a mortgage allows you to secure financing using your home as collateral, typically over a period of 10 to 30 years. This can help you purchase a new home or refinance an existing one with structured repayment terms. However, it’s essential to keep up with payments, as missed repayments could put your property at risk of repossession.
How Does a Mortgage Work?
A mortgage is a loan designed for individuals looking to purchase a property or refinance an existing one. The amount you can borrow is determined by factors such as your income, credit score, and the property’s value. Lenders use a Loan to Value (LTV) ratio to calculate the maximum mortgage amount available based on your deposit or existing equity.
For example, if a property is worth £450,000 and you provide a £100,000 deposit, you may be eligible for a mortgage of up to £350,000 with an LTV of 80%. Different lenders offer varying LTV ratios based on factors such as:
- Age
- Credit score and history
- Employment status
- Employment status
- Income and outgoings
- Existing debts or financial commitments
Mortgage repayment terms typically range from 10 to 35 years, with interest rates varying based on market conditions and your financial profile. If you already have a mortgage and want to borrow more against your home’s equity, your current lender may need to approve the additional loan.
