Mortgages - The Basics
What is a mortgage?
A mortgage is the legal term for a loan borrowed in order to the
purchase any form of land.The loan is secured by the land.
Why
mortgage?What are generally the main reasons?
The main reason people apply for a mortgage is to own there own home
for themselves and there children in the years to come.Money paid on
rent is never seen again when this can be diverted into slowly owning
an asset and a home outright.
Why
not buy with cash outright?
The problem with this is that the value of properties rise over time
due to
various economic factors- on average about 4% a year.If you saw a house
today at the average market value for £275,000, how long
would it take, if you saved up as much as your salary as you could to
reach that amount?Say 40 years of saving £6875 (even more
feasable with a partner) each year.You then go down to your local
estate agents only to find the same property you had
your eye on 40 years ago, has now gone up in price by estimatedthe
property would have increased an estimated 160%(4% annual average price
increase by 40 years).That would now means the property is still well
out of your range at £440,000! Yes the estimated average
property price will one day reach that of half-a-million pounds
range.And all the years of budgeting and frugal living in order to save
the cash may have gone in vain.
