A mortgage is a loan required to finance the purchase of a property. A mortgage allows individuals to buy a property now and pay for it over a number of years.
When you are obtaining a mortgage you will need to put down a deposit. The amount of this deposit will depend on whether you are a first time buyer or non-first time buyer, and also on the lender’s criteria for the amount they will lend compared to the value of the property.
The mortgage amount will be the purchase price of the home, less the amount of your deposit (which can be made up of savings and any financial gifts from e.g. parents). As with all loans, mortgages must be repaid by the borrower with interest. Your interest rate can be fixed or variable.
Regular payments must be made over the term of the mortgage to repay the mortgage loan. These payments are usually made monthly and are made up of two parts – the first part is the principal amount borrowed (also called capital), and the other part is the interest. The interest is the fee the lender charges for borrowing the money.
The larger the deposit that you can put down, the less money you will have to borrow, hence the less interest you will have to pay over the term of the mortgage.