The biggest financial commitment most of us will make in our lives is the mortgage on our property. If you are divorced and looking for a new home then finding the right mortgage is esssential.
What is a mortgage?
A mortgage is a loan taken out to buy property and is probably the biggest financial commitment most of us will make. It can be daunting if you are now to be solely responsible for paying a mortgage when previously there were two of you. Even if you have been unable to stay in your home as part of the divorce settlement you may still have to pay part of the mortgage.
You can change your lender without moving home in order to get a better deal – this is often referred to as re-mortgaging. It is also the best and cheapest way to borrow a large sum of money in the long term but in these very uncertain days it can be very difficult to be able to satisfy the conditions the lender imposes.
There are two basic types of mortgage; repayment and interest only.
A repayment mortgage is one where monthly repayments are made for an agreed period until the loan and the interest due are paid back.
Interest only mortgage
This means that you make monthly repayments for the agreed period but these only cover the interest on the loan. To pay off the loan at the end of the term you will need to pay into another investment or savings plan to accumulate the capital sum (the amount you borrowed). If you don't do this you will have to re-mortgage again.
Your mortgage company may require you to have life insurance that will pay off your mortgage in the event of your death and insurance is also available that will cover your repayments if you become ill or are made redundant.
Money is confusing so our our ever helpful government has produced a website that makes things clear. It is an invaluable place to find out about mortgages and a whole lot more useful stuff about financial products. Check it out whether you are thinking about buying a house or looking around to change your mortgage.
Remember that if you do not keep up payments on your mortgage or other loan secured upon your home it may be repossessed.