Mortgages have become suitable alternatives for house-hunters
Housing is a crucial component for any economy. It is our source of protection, our resting place and research has shown that housing leads to increased productivity. There are a number of ways you can own your very own home. One of them is through mortgages. According to Anglo-American property law, a mortgage occurs when an owner pledges their right to the property as collateral for a loan. There are certain factors to be mindful of before considering taking out a mortgage. Here are some considerations Lamudi Ghana has highlighted to help you in your decision making.
1. The property search
Before obtaining a mortgage loan, you have to search carefully for properties that match your preferences. In selecting that dream home, the offer price should be your key consideration. Comparing the price per square meter of each property is a good way to know if you’re getting value for money.This can be deduced by dividing the offer price by the total floor area. Other notable considerations are the location, quality of construction, size of rooms, plot size, availability of parking, proximity to your workplace, and access to public utilities. A number of platforms are available to assist you in finding the right home. You can choose from a real estate developer, get assistance from a real estate agent, or obtain a wide variety of property choices from real estate portals such as Lamudi.
2. Agree on payment terms
You should endeavor to find out the number of years left on the lease of the properties you have shortlisted. After identifying the property of your choice, negotiate the price and payment terms and transfer the funds to the home owner.
3. Collateral needed?
The great part of obtaining a home loan is that you do not need to have an additional property as collateral. A mortgage essentially means that you are using a loan to buy a home while using that same home as collateral for the loan. This is what makes a mortgage an attractive form of acquiring a property. It gives you the flexibility of repaying the loan in monthly instalments. In Ghana, lenders such as Ghana Home Loans provide borrowers with mortgages for durations of up to 20 years. It must be said however that a mortgage provider would consider an individual’s ability to repy the loan and other risks before entering into an agreement.
After the mortgage has been approved, the mortgage lender proceeds to pay the loan amount on your behalf. An agreed monthly deduction is made depending on the interest rate type. There are two main types: fixed and variable interest rates. The fixed interest rate enables a mortgage borrower to make monthly repayment amounts that do not change over the life of the loan. It is a good option if you believe that interest rates are likely to be increased in the future. This ensures that your loan will remain at a lower interest rate for the duration of the loan.
The drawback for such rates in Ghana however is that the loan is priced in foreign currencies. This would mean that for an individual whose income is in Cedis, a spiral of the local currency more cash would be needed to repay that loan.
A variable interest rate is the kind that may change from time to time depending on the volatility of a lender’s base rate. The base rate is determined by operational costs and the cost of funds. Additionally, a borrower’s risk is factored into the computation of an agreed interest rate. A variable interest rate is usually higher than a fixed interest rate.
Written by: Fidel Owusu Amoah | Content Manager- Lamudi Ghana