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If you are thinking of buying your own home then you
will probably be thinking about a purchase
mortgage unless you are lucky enough to be incredibly wealthy.
Depending on where you are located and who offers you a
purchase mortgage there are a range of
variables to consider. The principal is the proportion of the value of the
property that your lender is loaning you. A 100% means that you are being
loaned the full amount. A 75% mortgage means that you need to be able to pay
25% of the value of the property, or ‘down payment’ when you buy. A
purchase mortgage is a ‘secured’ loan,
meaning that if you do not keep up repayments on your mortgage or any other
loan secured on it, the lender can take possession of your property in lieu
of payment.
Each month you will pay a proportion of the principal
and interest on the outstanding amount. If you have a variable rate
mortgage, this means that your interest payments will go up or down,
reflecting bank interest rates. A fixed rate
purchase mortgage will remain the same for the term of your mortgage
agreement. The size of the amount you borrow and also the proportion of the
total value of your property both affect the interest rate you are offered.
You will be offered a better rate of interest for a 75% mortgage as opposed
to 100% because this represents less risk for the lender. Most people are
offered a mortgage of three times their annual salary.
Check with a professional advisor for your eligibility
for tax concessions and government backed home buying schemes. |
