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A mortgage is a secured loan contract that can fulfill your dream for owning a home, but it can also be a huge source of responsibility or anxiety if you fail to manage it properly. In order to avoid the possibility of foreclosure, you need to compare mortgages that are suitable to your financial requirements and payment capabilities.
Factors to consider in determining the best 90 LTV mortgages
You need to understand that the best mortgage deals are determined neither by the lowest mortgage rates and application fees nor the highest maximum loan to value ratios (LTV). What is most important is for you to thoroughly evaluate the following in correlation with one another:
• Minimum amount necessary to build or buy the property – Knowing the cost of construction or the purchase price is important so that you will know the mortgage amount you have to apply for.
• Maximum amount you can comfortably pay – Getting involved in a mortgage obligation in which amortization eats up most of your income is never advisable. It will only put you in a bad financial condition wherein your net income will not be sufficient to take care of your basic needs.
• Future source of repayment, if any – If you are certain that you will receive or raise a sum of money to repay the whole mortgage amount upon the due date, you may opt to apply for some interest only home loans. As the term connotes, this type of payment scheme allows a mortgagor to only pay the interest amortization while the principal is paid at the end of the term.
• Stability of your present source of income – A mortgage usually involves a long-term repayment period that may extend to 36 years or more, so it is recommended that you are sure you have sufficient cash flow to satisfy the regular monthly payments.
How do the above factors relate to one another?
All of the above factors must be considered to make a rational judgment on which is the best mortgage to pursue either being fixed rate mortgages, offset mortgages, or remortgages. For instance, you may have determined the total construction cost of the building to be financed or the property to be acquired, but you must also think about whether you can pay the amortization for the proposed loan amount. In case you cannot afford the regular amortization for the mortgage you are about to sign up for, you may have to see if you can offer additional equity or capital up front so that the amount you have to borrow will decrease. If you do not possess the equity needed, you can choose to acquire an interest-only mortgage as long as you have in mind a sure source of principal repayment upon the expiry of the mortgage tenor. Lenders like Nationwide, HSBC, Halifax, and others are more than willing to work with you to help determine the best possible solution.
To determine the appropriate number of years within which to pay the mortgage, you have to reflect upon whether your occupation or business will exist until the mortgage has been fully paid, or you may have to look for another income source to formulate a back-up plan. Leverage the power of a mortgage calculator in this step to better understand a mortgage’s monthly payments based on amount borrowed, term, and interest rate.
Finding the most economical mortgage deals online or by other means is important since it will determine your future financial status. Mortgage deals for first time buyers is even more critical. Once you decide on the terms of the home loan, you must be ready to face any difficulties that may arise from the said transaction to prevent the risk of having the mortgaged property foreclosed.
This document does not constitute financial advice under the Financial Services and Markets Act 2000. If you require such advice, you should seek appropriate professional advice.