What is a mortgage?

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Not all people have the ability to buy a house. And instead of saving money in order to buy their desired homes, the mortgage was made.

What is a mortgage? 

Simply put, a mortgage is a loan secured by real estate.

Features of the mortgage

A mortgage differs from other loans in a number of conditions:

– 80% of the amount of the cost of housing is issued. That means, you need an initial payment, which the borrower pays on his own.

– The borrower does not receive money directly into his hands. The funds are transferred to the seller of the apartment using a non-cash payment. This helps to protect the bank from misuse of money, for example, when you would buy a car or other needs instead.

– On average, such a loan is issued for about 20 years. At the same time, you have to pay for it every month.

– The bank keeps the apartment for itself on bail in order to confiscate the apartment in case of non-payment.

Pros and cons of a mortgage loan?

Before you go to the bank and apply for a mortgage, you should always know what the pros and cons of your mortgage are.

Pros of a mortgage: 

– Own housing – the issue of living disappears by itself when you have your own house.

– Partial savings – compared to renting someone else’s housing, you will not be left with anything in the end.

– Timeliness – while the money for the house will be accumulated, its cost will repeatedly rise.

– Investment in real estate – the most profitable is to invest in apartments. Housing can always be rented or sold. It can also help you to save the money that could be spent on renting someone else’s housing.

Cons of a mortgage:

– Overpayments – can reach up to 100%. This includes payments on a loan, and registration of compulsory insurance, and payment of a notary.

– Complexity of registration. The procedure for collecting documents takes a lot of time.

– Long terms – the mortgage is issued as a long-term loan for a period of up to 30-50 years. In this case, you will have to give up the excesses for a long time since the installments on loan must be paid monthly. Sometimes it takes a lifetime.

– The risk of home loss – as with any long-term loan, you must make the monthly payment strictly and on time. If this does not happen, the bank can take away the apartment. Anything can happen in such a long time. Therefore, you need to calculate all the possibilities before applying for a mortgage.

Whether it is worth taking a mortgage, everyone decides for himself. But today, there are many lenders and insurance companies with different programs and conditions that will help facilitate the process of loan repayment.

Written by Bader Albader, market researcher.