Nowadays people are generally afraid or hesitant of taking mortgages. Maybe it’s because a lot of us think Mortgages are too huge of an undertaking or responsibility to handle. But the truth is they’re actually quite the reverse – when done right.
So don’t be afraid – they don’t bite, I’m going to show you how Mortgages are actually beneficial to your financial and life goals!
So What Exactly is a Mortgage?
A mortgage is a loan from a bank that helps the borrower purchase property. The mortgage is secured by the property itself, meaning if the borrower defaults, the property serves as collateral so the bank can recoup its losses. Mortgage payments are usually monthly and can span up to 30 years.
We try to advise or simplify this process for the ‘young or first timers’ so when they get to their mortgage brokers, they have an idea of what to expect. Ideally, I recommend your monthly payment be, at most, 30% of your total monthly income in order to best service the mortgage.
We advise conservatively, so when you meet your Mortgage broker he/she will have good news for you! Here’s an example of how you should work out your mortgage budget:
Let’s say you have a take Home Salary of $20,000.00 per month
30% of $20,000.00 = $6,000.00 per month approved
If property is $1.2M and the mortgage interest is 7% of 80%
$1,200,000.00 x 80% = $960,000.00
$960,000.00 x 7% = $67,200.00 per year
$67,200.00 / 12 months = $5,600.00 per month (Et voila, you’re qualified)
In some cases you may be required to have a 20% down payment (deposit of 10% and 10% that the bank does not lend), which is why your payments are based on the remaining 80%.
This is just one example to be used as a gauge when working out your monthly payments.
Check out the new Mortgage calculator on our website. www.tuckerrealestate.com.
Now even after all that budget brainstorming you may still be thinking that taking a mortgage is a huge risk. Not so, it’s more of a calculated risk that works in your favor if you use the method above and commit to your payments. Here are a couple advantages of having a mortgage up your sleeve:
The mortgage loan is granted with your property as security, so if anything goes wrong the lender’s loan is still repaid and due to this, interest rates on mortgages are generally lower.
A favourable credit rating is guaranteed if you keep up your payments in a timely manner because it improves your overall credibility. This will help you tremendously in getting other loans with lower interest rates.
TUCKERTIP: “Nowadays one person’s income does not qualify them to purchase the property of their dreams. They may need to join with a spouse or partner to have two incomes to be able to service the mortgage.”
Remember there is no better time than NOW (Trinidad’s property prices are currently dropping).
Your capital gains would be appreciated in years to come!
Would you like us to get in touch with you and help you learn more about financial success in Real Estate?
Drop us an email here. We always reply!