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Category: Mortgages Date: 2/11/2011
In the second part of our "Explaining financial jargon" series we're taking a look at the merry world of mortgages.
The word mortgage is derived from an old French phrase meaning "dead pledge" – cheery isn't it? A mortgage is basically a loan that is secured on a property you own (secured means that should you not be able to pay your loan – your mortgage lender can sell the house to get its money back).
Because a mortgage is secured in this way, it is the cheapest form of long term borrowing you're likely to get. The reason that it's referred to as a "dead pledge" is because of the size of the loan and the length of time it can take to repay…
Depending on how much your home cost when you bought it, you might have needed to borrow tens or even hundreds of thousands of pounds. To repay that amount of money you're going to need a while. Mortgage terms tend to start at 25 years, but can be for as short as 5 years, all the way up to 40 years. The term depends on you – the shorter it is the quicker you will repay the loan (providing of course, that you're on a full repayment mortgage and not interest only mortgage), but this does mean a higher monthly repayment.
So let's look at five aspects of mortgages and really get behind what it all means so that next time you come to review your "dead pledge", you don't end up dead confused as well!
So there it is: mortgages. Next time we're going to delve into the bonkers world of pensions and annuities: with terms like trivial commutation explained (not a board game in case you're wondering) it's not to be missed!
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