Читать книгу Money: A User’s Guide - Laura Whateley - Страница 19

The bigger your deposit, that is the lump sum of cash you are bringing to the party, the smaller the amount you have to borrow from a bank, the more of your property you actually ‘own’ from the start, and, naturally, the cheaper your monthly mortgage repayments.

Your monthly mortgage repayments will depend on the type of mortgage product you go for (read on for a detailed explanation of this), but will mostly likely consist of some capital repayment, that is an amount you pay to chip away at the fundamental sum that you are borrowing, and interest, which is, to put it most simply, the fee or the penalty you pay to borrow the money from the bank. Interest is charged as a percentage of the size of your mortgage, so if you borrowed £100,000 and your interest rate was 2 per cent, you would owe £2,000 interest a year, paid in monthly chunks.

The size of your mortgage is the size of the proportion of your property that the bank still technically ‘owns’. If you can’t pay your mortgage back your property will be repossessed, which means that the bank sells it to recover the value in cash of this proportion. If it is repossessed at a time when property prices are depressed and your home sells for less than you bought it at, you could end up owing the bank more money than you started with.

The aim is to pay down your mortgage over time and start to own more of your property. If house prices rise your house is worth more, so the amount of loan you have outstanding on it has shrunk relative to its value, though you will not feel the cash benefits of this unless you sell, or remortgage.

If house prices tumble, as happened after the financial crash, you could end up in ‘negative equity’, that is where you owe the bank more in a mortgage than your house is actually worth, and you will not be able to move, becoming what is known as a ‘mortgage prisoner’. Falling into negative equity is less likely than it was, because since the credit crunch banks are much more cautious about how much money they will lend to you.