How to behave when buying a house and entering a mortgage loan. details, explanations and advice. What you should do and what you shouldn't.

In other articles, we’ve talked about home equity, structured settlements, and 2nd mortgage loans. We’ve discussed some points regarding the necessity to be very careful when taking a 2nd loan, as your first debt might be harmful in the future, if you can’t get to afford it. the mechanism of mortgage loans is complex and has some obscure points and aspects that should be considered thoroughly before getting to enter a mortgage loan to buy a house. As for the concept itself, mortgage usually involves some words and terminology that you may not be used to, and that we should take into consideration: in first place, what a “property” actually consists in, in this case, just the physical domain; the mortgage, consisting of the guarantee the lender takes to make himself sure that the borrower, the person who asks for the money, will pay, with the menace of losing his house if going on default. What we call lenders are usually banks and financial institutions, organizations that have the money which you can use to buy and get your property. The resort to mortgage loans is very common when having to buy a house as it is the only way in which banks can be sure that you will pay always in the terms agreed in the loan. Sometimes it might be in 10 years, sometimes in fifteen, twenty, and according to the countries maybe thirty years –in Great Britain, for instance , you can take loans up to fifty years long. In the terms of the agreement, you have to study very well your possibilities, as it is crucial to understand the two possible mortgage loans available: with fixed interest rate and with flexible interest rate. In the first case, as it name indicates, the mortgage is calculated taking into account the market prices in that specific moment, and the interest for the periodic payments is frozen: for the years of endurance of the agreement, you will always pay the same quota, without it being altered, no matter how much the market rises or goes down. This can be less satisfactory and can make you doubt if you are passing through a period in which markets are trembling and may go down. Here’s another important point: you should always have the correct and proper professional assessment. People coming from and working at the world of finances should advice you on what to do when entering a mortgage loan. Private parties, apart from the bank –that will always advice you what’s convenient to them-, should be the ones to help you decide. Sometimes, if you get a fixed rate loan, you dismiss the possibility of saving money when market crashes, as it happened in Argentina in 2001 when devaluation came: the people who were storing his money in dollars was very benefited, and that was probably due to fine assessment, as it was something that no one thought possible. On the other side, the flexible interest rates of a mortgage loan consists in the possibility of varying the quotas according to the moves of the market. Again, this can be very profitable, but if you are taking a very long term mortgage loan, In periods of crisis, you may lose lots of money as for the increase in the interests you may have to face. That’s why it is strongly recommended to be properly advised. Mortgage industry is growing a lot, more in the US. According to Wikipedia, “mortgage lending is a major category of the business of finance in the United States. Mortgages are commercial paper and can be conveyed and assigned freely to other holders. In the U.S., the Federal government created several programs, or government sponsored entities, to foster mortgage lending, construction and encourage home ownership”. With governments oriented to gaining money through financial businesses, it is not strange to see them promoting this type of businesses, in which several times the borrower is affected, not only by the tremendous intolerance of the creditors, but also because they fall into traps, in which there are little letters that they didn’t read on the contract, or because of clauses included against their own will.

The risk for the lenders in mortgage loans is very little: you are taking money with your house as a guarantee. This is the reason why you should find low interests in general mortgage loans, and you are properly adviced to find the better ones, and to as for the just and fair interests that you can get. There is no need for the lender to fix a very high interest, as it is obvious that you will pay, when having the risk of losing your home.

So be aware, and be assessed before entering a mortgage loan. And also consider that, if you organize yourself well and you can run properly a personal economy, you may also take advantage of the possibility of having a 2nd mortgage up to you first mortgage loan. In this case, you will earn some money according to the price of your property and the amount paid until that moment. We have written already an article on this (see 2nd mortgage in this same page). The explanations of how to get into 2nd mortgage should apply for the first one: organized economy and basic planning are the keys to be successful in this task. You have all the tools to think, study and analyze how mortgage works. Sometimes you may choose to opt for other systems of money lending, but consider that mortgages will always offer less interest that any other interest, of course, due to your house put at risk. So you are going through difficult times, think it twice before going into mortgage. It’s always better to have debts than not having a roof. You have to be conscious of this issue, so that you can put everything into its proper weigh.