Most people, when they want to buy a house or a flat, do not have other option than getting a loan. The most common type of loan used for buying a home is mortgage, and most people opt for this option when they want to buy their own home and settle down. When you apply for a loan, the lender is secured by the home you are buying, and in case you fail at repaying the debt in full, the lender is allowed to foreclose the part of the property that remains unpaid in order to pay off the loan. On the other hand, once you repay the debt in full, the home belongs to you only. The debt is usually repaid in monthly installments, and a certain amount of interest is also added to the principal sum.
Choosing a mortgage may not be easy, since there are plenty of possible borrowers offering different conditions for getting the loan. However, the basic division between the mortgage types is on fixed-rate mortgages and floating-rate mortgages. Fixed-rate mortgages have a fixed interest rate, determined according to the average rate at the time when the mortgage agreement is signed. This means that, no matter the market conditions, every mortgage installment will remain the same until the full debt is repaid. Floating-rate mortgages have an interest rate which changes according to the changes in market conditions; therefore the amount of debt paid monthly can be higher or lower than it was during the initial period. These mortgages also need to be revised more often because of the changes that may occur.
It is important to manage your mortgage successfully, in order to avoid any potential inconvenience while repaying the mortgage debt. The basic steps you need to take for managing the mortgage are: reviewing the mortgage, topping it up, restructuring the mortgage or switching lenders if it is necessary and knowing what to do if you cannot manage to repay the full debt.
Reviewing your mortgage includes checking on your mortgage progress or potential changes every year or two. It is advisable to do it when the fixed-rate loan is almost expired, when you have a floating-rate mortgage and the rate changes, if you experience a major change in life such as losing, getting or changing a job, and if you suddenly get a large sum of money such as lottery prize or inheritance.
Topping up the mortgage includes increasing the repayment period if you find it too difficult to repay the mortgage on the initial terms. When the interest adds up, you will end up paying a slightly higher overall sum, but this is a good option if you find it too demanding to repay the mortgage debts every month.
If you cannot manage to repay the mortgage debt, it is important to know what to do and where to find help. You can contact your lender and check whether there are some better options and you can try finding the best solution together.