Mortgage is a loan that is paid to you by the lender to purchase a property. In return you pay interest to your lender and your lender will keep your home as security for the mortgage. So there is always a risk that your lender can possess your home if you cannot payback the mortgage.

Options for Repayment

The two basic components that constitute the mortgage are: the loan (the money that you borrow) and the interest (the amount charged by the lender until you pay back the loan).

You can either pay the interest and mortgage amount on monthly basis (repayment mortgage) or you can pay interest amount every month and pay all mortgage once at the end of your mortgage term (interest-only mortgage).

Repayment Mortgage

As explained above, repayment mortgage is the amount comprising the interest amount that you’ll pay every month as well as a small amount of mortgage. Borrowers around the world choose this type of mortgage because in this manner your total mortgage amount starts getting smaller gradually.

Interest-Only Mortgage

As the name explains, under this program you will only pay the interest you owe above the amount you have borrowed and the mortgage itself remains harmless. You’ll have to pay the full mortgage amount at the end of the term. Therefore, when choosing this program, it should be kept in mind that you have a sound payment plan to pay off your mortgage for example savings plans, retirement plan etc.

This mortgage plan should be chosen carefully since there is no guarantee that you’ll be in the position to pay back your full mortgage at the end of the term. You have to keep an eye on the stability of repayment plan throughout the mortgage term because in case you will not be able to pay back the mortgage you will have to lose your home.

The amount that you can borrow depends upon you annual income, your expenses and the home or property you are buying. Your lender will closely examine your credit record as well. And finally with the consensus of your lender you’ll get an amount that will be sufficient for you to buy the home and that you can pay back easily.

If you are considering t mortgage program for your next property Avon Financial is delighted to help you. Our team of professionals will guide you through and help you get the best suitable plan.

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