Why Have A Mortgage?

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Or, to put it another way, why buy a house?

You will probably have seen it written, or heard it said, many times before - a mortgage is the largest debt you'll ever take on in your life.

Put that way, it's a frightening prospect - one that should only be considered under circumstances of dire necessity. Yet we treat obtaining a mortgage as a great accomplishment - something almost to be celebrated. I well remember the TV adverts that portrayed different people when they first received the news that they'd got the mortgage they were hoping for. Their reactions ranged from subdued excitement to outright ecstasy! None of the ads portrayed those same people going out to work, day in, day out, to pay the damn thing off!

Why do we treat mortgages this way?

Almost certainly because having a mortgage means 'owning' our own home, which, like getting married and having children, is something we think our parents would like to see us do. Seen as "taking on a huge great debt that's going to be hanging like an albatross around our neck for the next quarter century", perhaps those same parents wouldn't be quite so enthusiastic about the whole thing!

Very few people actually build their own homes in the Western world now and those who do still have to pay for the land and materials. If you're left a house in a will that can save a lot of problems (unless you have to pay any inheritance tax as well!) but it is rarely what you'd have chosen yourself and most inherited homes are quickly sold off for cash.

There's no getting round it - owning a home means getting a mortgage and that's where the fun always begins. The whole process of raising a loan on a house is frequently shrouded in a smoke-screen of doubtful legal necessity ("My solicitor arranged everything for me"), awesome expense ("That nice broker only charged me 2% to get the loan - the other fees were terribly high though") and horrifying ignorance ("Well, I'd had my deposit account with them for years, so I thought I'd try them first"). The equivalent of being left blind-folded in the middle of a swamp with your hands tied behind your back!

The vested interests at work frequently prefer it to stay that way

That's not to say that there aren't very good conveyancing solicitors and highly efficient and competitive mortgage brokers and lending banks - the best will save you years of misery and unnecessary expense - but frequently you're left with the feeling that, "If only I knew how, I'm sure I could do better myself". The simple answer to that is very often you can.

That Holy Grail for first-time buyers, the 100% mortgage, has usually meant very expensive mortgages, whilst the 'low start' mortgage, has also shown its hidden teeth in the ever-rising payments each year, often when employment prospects are bleak and overtime severely limited.

If all this sounds like I'm trying to put you off getting a mortgage then you're right

Life is for living and enjoying, not paying off huge loans, and very little real thought is usually given to the long term implications before taking out a mortgage. However, owning your own home IS socially desirable and it does mean that the stock of houses is kept in much better condition than if they were rented.

But DON'T run away with that myth of the early and middle '80s that owning your own home is a 'good investment'. The later crash in property values put paid to that. In particular, consider that the average period of ownership of any one particular house in the US/UK over the last twenty years has been just 4 years. Under those circumstances are you 'owning your own home' or simply 'buying and selling'? Would renting be simpler and less costly? Would renting give you greater mobility, able to follow the jobs where they arise? Most importantly, would renting give you more time to enjoy your life and less time worrying about the monthly payments on the mortgage?

If you're still adamant about buying your own home then read on, because as a home-owner with a mortgage myself, I'm not going to argue with you! As a fifth generation builder, turned mortgage broker, turned writer I've seen, and learned from, most of what goes on in the mortgage business and can guide you through the complexities. Read this blog as it develops and you'll have taken in as much as most mortgage brokers and more than the majority of bank and building society counter staff.

By the way, that's not supposed to be a criticism - counter staff are trained very well to understand their own company's products but aren't expected to provide an overview. You, on the other hand, as the consumer, DO have to know the essential tips and tricks if you're to make a success of the largest purchase in your life.

Read on and have your eyes opened...