The first mortgage is a primary debt that gets registered against a property. The transaction can take place when a property is purchased and the lender who financed the purchase will hold the first mortgage. Some loans can also be secured by a second mortgage, these funders put a mortgage behind the current first mortgage held over a property. Any financial institution or private lender can take a first or second mortgage over a property, it is one of the most preferred options for lenders.
Things to know about the first mortgage
If you have a first mortgage on your property whilst you own the property the lender who has the mortgage has rights over the property. The borrower has no right to transfer the property without repaying the lenders debt. The lender also has terms and conditions of the mortgage that you must follow such as you will repay the borrowed money following the agreed terms and conditions. The lender has the right to sell the property if you default under the terms of the mortgage. The lender can make a recover their debt by selling the property under their rights as a first mortgagee.
Aspects of the first mortgage
When you are thinking about buying a house and obtaining a first mortgage it is one of the most important financial decision. Consider many factors because even the slightest mistake can prove to be costly later on.
- Select the right loan
The market is full of mortgage lenders, and you must select a loan that is right for your situation. You cannot take up just any deal because not all are appropriate for you. Choose a loan that will meet your requirements and has criteria that you can meet with ease.
2. Affordability of the first mortgage
When you buy a house, or any investment property, affordability is a significant factor to consider. As a general rule first mortgage repayments should be no more than 30% of your gross income. First mortgage loans are a long term commitment and you should consider that you will be able to afford payments for the next 20–30 years. You should not over commit yourself when considering taking out a first mortgage loan.
3. Benefits of keeping debt and mortgage payments low
We recommend keeping the debt and the mortgage repayments within the range of 30% to 40% of your gross income. You should not commit to buying a property unless you are confident that you can afford it and also factor in any unexpected life issues that could eventuate. Many people commit a mistake by taking up high repayments. It is the most dangerous pitfall that you have to avoid.
4. Research from quality websites.
You can research first mortgage loans from many websites from major banks or financial institutions to collect information before committing to a loan. Collect information on aspects like first mortgage terms and available lenders. It is the best way to compare different lenders and current deals. It will also help you to get the lowest rate.
5. Getting the right deal
As a consumer, you must aim to get the right lender. You should be able to trust the lender and feel comfortable with their terms. They should hide nothing from you, and be upfront in disclosing all the terms and costs. Try to get the best deal in terms of interest rates and repayment methods. A top mortgage lender is crucial for getting a successful first mortgage.
Summing it up
A first mortgage loan is one of the biggest financial commitments you can make, so take the time to ensure that you get the right loan for your circumstances.
