Risks involved with Mortgages

The important question is, are you comfortable with the risks involved with Mortgages? It’s important that you’re aware of the risks, and it’s even more important that you’re prepared for the worst possibly outcome. If you’re not comfortable with the risks, my advice is to think deeply about whether you want to be in debt. You need to realise that Mortgages have high risks and penalties if you don’t keep up with them.

What if Interest Rates changes?
This will not affect your monthly payment with in the “fixed rate” period, which is typically 2 years. After that period expires, and you enter the “variable rate” zone, change in interest rates will have impact on your monthly payments. If Interest rates go up, make sure you can afford to pay the extra amount.

Make sure you understand your Mortgage Policy
A lot of Mortgage borrowers don’t understand their policy properly. Be aware of ALL costs and foreseeable changes in your monthly payments. For example, after you escape the fixed rate period and start paying at a variable rate, your monthly will most likely increase. Make sure you are aware of the change in price, and make sure you can afford the change.

Make sure you can afford your mortgage if your income falls.
You will still be liable to pay your monthly mortgage on time if you fall ill or lose your job. You need to think about whether you can keep up with those payments. It’s always best to put money aside in case you get yourself into this situation- these things are unpredictable.

The value of your property can drop.
If the value if your property drops, then you will still have to pay the amount you borrowed, so you could end up paying more than your property worth. Property crashes are some times unpredictable, but they happen.

Early Mortgage Repayment
This only applies to “repayment” Mortgages. If you have a large amount of money saved up and you want to pay off your Mortgage, be aware because some Mortgage lenders may apply penalties. You may be charged for paying your debt off early. Sounds silly, right? But you need to remember that Mortgage lenders will lose out on money if you clear your debt early. So make sure you find out if there are any early repayment charges. Of course, not all lenders apply this charge, and some lenders let you make early repayments after a certain amount of time, without applying any charges.

Of course, there are a lot more risks, I just listed a few of the most common ones. But if you’re comfortable with the risks I mentioned, then you shouldn’t have much more to worry about. Unfortunately, a lot of homeowners lose their homes every year because they can’t keep up with payments, maybe because they weren’t aware of all the risks.

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