What is a Mortgage?

Generally, a mortgage is an ideal type of loan for purchasing a property. Most people do not have the necessary amount of funds available to buy a house or apartment outright, so a mortgage is a way to borrow the thousands of pounds they need, at a lower interest rate than other types of loans.

The term for the loan can vary, from a length of 25 years to even 30 years. It is not unusual to find the monthly repayments substantially lower than the cost of renting property of the same type.

Mortgages all follow the same basic set-up: the borrower is loaned the money by the lender (i.e. a bank, building society or mortgage specialist) with the property put up as security for the lender. This means that should the borrower default on the repayments, the lender is entitled to recoup their losses by selling the property. The title of the property (and therefore the ownership) is given to the borrower once the loan has been repaid in full.

There are also other reasons for taking out a mortgage. A second mortgage or remortgage can be taken out of your existing property to either reduce the monthly payments through a lower interest rate, or as a type of secured loan if you need to raise funds for other purposes.