Tuesday, July 27, 2021 / 09:20
AM / by Green Park Estate / Header Image Credit: Tree and Hill Landscape
You probably clicked on this link because you're interested in owning a home. Maybe now or somewhere down the line but everyone wants a home, we all want to get the burden of annual or monthly rent off our bill and realise our homeownership dreams.
Well, except you come upon a huge cash windfall, earn more than the average income-earner or you're an uber-successful businessperson, you need to plan extensively and weigh all your options before embarking on a housing project.
Funding a home is no easy feat and most individuals require debt instruments to execute such projects in good time. The most common instrument among these is Mortgage which guarantees the borrower a sum of money to make the real estate purchase and the debt is serviced over a period. In return, the property is pledged to the lender who is reserved the right to foreclose the asset in the event of a failure of the borrower to fulfil the contractual agreement.
Notwithstanding this point, which might appear like a downside, mortgage is largely favoured by real estate investors due to the large funds it affords and its long-term repayment flexibility, these are two things personal loans, on the other hand, do not guarantee.
Even though mortgage has its fair share of pros and cons, there are salient facts about it that prospective lenders must know before utilising this option and like every kind of loan, extensive consideration must be paid to the interest. To further improve your understanding of the subject matter, we have shed more light on the popular mortgage types below:
: This type of mortgage guarantees that the borrower pays a fixed rate over a certain period, which could be short-term, mid-term or long-term. This mortgage is insusceptible to the fluctuations of the money market nor the oscillation of inflation. That is, if you get a 30-year fixed-rate mortgage in 2020 at 6%, you will keep repaying it at that same rate until completion in 2050. Regardless of market interest rates, your mortgage rate change. To give our customers top-of-the-class services, we also offer this type of mortgage.
: Here, the lender pays the mortgage at a fixed rate for a predetermined time and upon the termination of that time, the rate reverses to the going market interest rates. Simply put, under these terms, a 10-year loan obtained in 2020 will be repaid at a fixed-rate for a time, say 5, before the adjusted-rate terms kick in and it becomes subject to the going market interest rate. This type of mortgage is generally not considered the best because a borrower may end up paying double the loan amount based on the stability, or lack thereof, of the money market in the country. Generally, the initial rate of an ARM is often lower than a fixed-rate mortgage because chances are that it will surpass it on the long run. It also has less stringent qualification criteria.
: Least popular of the trio and commonly avoided, is the interest-only mortgages. They are often structured in two parts: the first where you pay the interest on the mortgage alone and the second where your pay both the principal (amount loaned) and interest at a variable rate that could be as high as three times the amount borrowed. For instance, a 30-year interest-only mortgage at 10% rate begins with the borrower paying only the interest for a certain time, say 10, before the switch to the repayment of both principal and variable interest.
Guaranteed mortgage of up to N15million is now available when you buy any of the homes at . With a fixed interest rate of 6%, payable over up to 25 years, you too can begin your homeownership journey.