The best home loan for you will depend on your needs, your financial situation and where you are in your journey towards buying a property.
Mortgage borrowers can be individuals mortgaging their home or they can be businesses mortgaging commercial property (for example, their own business premises, residential property let to tenants, or an investment portfolio).
The lender will typically be a financial institution, such as a bank, credit union or building society, depending on the country concerned, and the loan arrangements can be made either directly or indirectly through intermediaries.
Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.
The lender’s rights over the secured property take priority over the borrower’s other creditors, which means that if the borrower becomes bankrupt or insolvent, the other creditors will only be repaid the debts owed to them from a sale of the secured property if the mortgage lender is repaid in full first.
This is how a typical home loan (or mortgage) works:
- Save a deposit: The more you save, the lower the amount you need to borrow and the less you will pay in interest over the life of the loan.
- Apply for a loan and get it approved: The lender approves the loan in principle, enabling you to look for a property within a set budget. Once you’ve decided on the loan amount, you’ll need to finalise the loan documents with your lender.
- Offer the property as security: This means you pay a lower interest rate than for other loans. But, if you fall seriously behind on your repayments, the lender has the right to sell your home to get its money back.