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What is a mortgage? ๐Ÿก

what is a mortgage

What is a mortgage? –

Introduction ๐Ÿ‘‹

A mortgage is where a person borrows money to buy a home or land.

You can either live in the home/land, or use it as an investment, to try and make money from it.

You usually need to pay the money back over a set term – 25 years is a common term for mortgages, but they can go as long as 40 years!

Disclaimer: This website provides information for guidance and educational purposes only. The Grown-Up School does not provide regulated financial advice. You can seek independent financial advice from a suitably qualified and regulated professional advisor. Check out our disclaimer policy for more information.

If you don’t pay back the money – your house or land could be taken away by the bank. They will then be likely to sell it, to make back the money that you owe them.

Paying interest ๐Ÿ’ฐ

When you get a mortgage you have to pay back all the money youโ€™ve borrowed, plus extra money called “interest”.

Interest is like extra money to say thank you to the bank, for lending you the money.

What is interest? (easy explanation) ๐Ÿ“ˆ

Paying a deposit ๐Ÿ’ธ

In order to borrow the money for the home, you need to pay part of the cost of the house, and your mortgage lender will give you the rest!

This is called a “deposit”.

For example, if you were buying a house for ยฃ100,000, a bank might ask you to pay ยฃ5,000 as a deposit for the house (5% deposit).

The bank would then lend you ยฃ95,000 to buy the rest of the house.

Where do you get a mortgage from? ๐Ÿฆ

People usually get a mortgage from either a bank or a building society.

Banks and building societies are very similar organisations and both let people borrow money from them in the same way.

The only big difference between a bank and a building society is who owns them (banks are owned by people called “shareholders“, and building societies are owned by people called “members“).

Mortgages can be quite confusing to apply for – so there are plenty of organisations that offer mortgge advice. A person who gives mortgage advice for a job is called a mortgage advisor.

In the UK, some organisations will give you completely free mortgage advice.

For example, London and Country usually offer completely free mortgage advice, and will take you through the whole mortgage application process, even finding and recommending mortgages for you.

Conclusion ๐Ÿ‘

So that’s it!

A mortgage is where a person borrows money to buy a home or land.

Hopefully you’re feeling more confident about understanding what a mortgage is.

If you know any friends or family members who might benefit from learning about mortgages, share this post with them!

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