In essence, a mortgage is a type of secured loan taken out to buy a real estate property or land. Home loans are usually set for 25 years, but may also be extended or shortened depending on the preferences of the client and the agreement made between the client and the lender.
By nature, a home loan is secured against the total value of your home until it is paid off within the agreed upon loan term. Inability to make timely payments on your mortgage can result in repossession or foreclosure. Your home will then be sold to other potential homeowners so they can recoup their losses.
What can you afford?
Never apply for a home loan if you know very well that you’ll be struggling making monthly repayments. Apart from the regular payments that you need to make on a monthly basis, you also need to consider other running expenses of owning a home such as repair, maintenance, utilities, insurance, and council tax to name a few.
Before giving an approval, your mortgage lender will make sure that your income and expenses are balanced, and that you can still make payments for existing debts that you may have under your name. during the application process, they will ask for you to submit your outstanding house bills, child care and maintenance costs, and other personal expenses that fall under financial obligations.
Due to the huge sum of cash involved in approving a home loan, mortgage lenders will make certain that all their clients can make repayments even when interest rates experience an increase in the future. Most often, they will immediately reject an application once they have assessed that an applicant will be unable to afford making timely payments in the long run.