Things to Consider Before Getting a Home Mortgage

Things to Consider Before Getting a Home Mortgage

2019/09/11

Buying a home is a dream we all wish to live at least once in our life time, but for most of us it’s practically impossible to live this dream without getting into debt by means of getting a Mortgage Loan. The loan is specifically used for the purchase of a home or property or both. Of course the ability of the borrower to obtain a mortgage will likely determine, whether he will be able to buy the home of his dream or not.

But this rosy picture of having your own home has its share of ugly part too. As we all have seen in recent years the economic conditions getting changed more too often, like the price for property falling below the amount of the mortgage, or you find your self on the wrong side of a mortgage because of its legal terms and conditions. The dream can quickly turn into a nightmare.

Hence, one must consider the 3 key parts of any mortgage before getting the same.

Size of Mortgage Loan: It’s the amount of money that you intend to borrow to purchase the property.

Term of Mortgage Loan: It’s the Period (expressed in no of Years) for which the loan has been taken. A term of 30 years is most common for mortgage loans. One can avail the loan for shot term period also but the longer the loan term, the lower will be your Equated Monthly Installment (EMI) but accordingly you will end up paying higher interest for loan.

Interest rate of Mortgage Loan: It’s the amount of money we need to pay the lender as a price of the money we have borrowed as mortgage loan. The installment is calculated as per annual percentage rate (APR) provided by the lender to the buyer. The APR can be of two types : fixed rate or floating rate. In fixed ATR the effective interest rate is fixed for the entire term of the loan, hence it’s surely higher to accommodate the financial risks. In floating ATR the interest rates changes during the course of the loan, based upon a specific formula defined in the loan agreement.

Taking the loan having these factors in mind will help in mitigating the risks involved.

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