Many people are scared of entertaining the idea of getting a residential mortgage. This might have been probably brought about by news of people losing their homes due to their inability to pay back their residential mortgages.
However, critical times require people to make critical solutions. Most of the people who get residential mortgages just want to create better opportunities through the money they would get from such loans. If you are in the same boat, better read the following information about residential mortgages:
What is a residential mortgage?
A residential mortgage is a kind of loan wherein you have to provide collateral. In this case, residential mortgages require houses or homes as collaterals.
The amount of money you could borrow through a residential mortgage depends on many factors. The size and condition of your house are the determining factors in this regard. Previous home mortgages would also play a role in your residential mortgage application.
What are the types of residential mortgages?
Different financial institutions use different types of residential mortgages. But generally speaking, home mortgages can be categorized based on the type of interest rate and duration of the loan.
>according to interest rate
Interest rate can be fixed or not. Fixed interest rates mean that it will not change during the duration of the loan. For example, if you have a loan of $50,000with interest of 2% per annum and you were able to pay $10,000 during the first few days of the loan, the computed interest of 2% will not be lessened. However, there are some interest rates that will automatically decrease the interest rate as you decrease the principal amount.
>according to the duration of the loan
A residential mortgage can be classified as a long or short term loan. Short term loans are expected to be paid in lesser periods of time. The maximum limit for a short term residential mortgage is usually two years. Long term mortgages, on the other hand, are better options for people who plan to use the money borrowed as investments. Most of these loans lasts for several years.
Should you get a residential mortgage?
Getting a residential mortgage is a decision you have to think about first. To help you decide, here are some questions you can ask yourself:
>Do I really need to get it?
Do you have any option other than to get a residential mortgage? If that option appears to be less risky, then maybe you should opt for that. However, you should remember that getting a residential mortgage would give you the benefit of being responsible only to yourself.
>Can I repay the loan?
Do you have the means (i.e. stable financial income) to repay your would-be residential mortgage? Of course, you wouldn’t want your solution to be a problem in the future right? Analyze and calculate if you can manage to pay your residential mortgage in time.
>Do I know the procedures of residential mortgage application?
Are you really informed? Why not ask your local financial institution for advice. Such organizations will surely be able to answer your queries clearly. Consultations with a financial expert would do great since you would be aware of the ins and outs of residential mortgages.
