11:30 18 December 2013
A mortgage is an arrangement where one borrows money in order to be able to buy a property. In such an agreement, the lender holds a lien (security interest) on the property until the money is repaid by the borrower. The mortgage is repaid over time with interest and once the loan is fully repaid the lien is released and the property is fully owned by the borrower. Mortgage repayment is made up of two parts, the capital – the amount borrowed – and the interest – the cost of borrowing the money.
You are responsible for making the agreed payments because a mortgage is a legal agreement. If you do not pay as agreed, the mortgage lender can repossess the property. Make sure you make the right decisions about how much to borrow, for how long and from which lender.
Ways to pay:
The interest only option will cost less each month than the repayment option but you should remember to include in your budget the amount needed for the cost of the investment it will take to be able to pay back the capital at the end of the loan term.
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