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The Do’s and Don’ts of a Residential Mortgage

A mortgage is basically a type of loan that is generally secured by the collateral of some sort of real estate. The collateral might be a piece of land, a place of business, or a fully built house. Mortgage loans are generally taken out by property builders and developers to finance the purchase of additional real estate. Rather than investing their own money, property builders simply take out mortgages on their existing real estate to fund new purchases. However, people who need a good amount of cash in an emergency also take out mortgage loans.

Because the loan is secured by real estate in your name, failure to pay means that the bank or the lending company would assume ownership of that real estate property. Therefore, you need to be very careful when taking out a residential mortgage. Most people who take out such loans in times of distress don’t really know much about how mortgage loans work, and are often fooled by the bank agents into agreeing with higher interest rates. Here are some of the “do’s” and “don’ts” of taking a mortgage loan:

Things to do:

  • The first and most important thing that you need to be sure of when taking out a mortgage loan is to pay all of your debts and dues on time. Every 30, 60, and 90-day delinquency on any loan will hurt your credit score, which plays a very important role in determining your eligibility and the associated interest rate. Banks generally try to minimise their risk when giving out such big loans. If your credit score is low, the bank will charge a higher interest rate to mitigate their risk.


  • Careful research is perhaps the most important thing for people who are taking out a mortgage loan for the first time. Rather than simply agreeing with what the bank agents have to say, it is advised that you contact a private mortgage broker and ask them to find a viable mortgage loan for you. A reputable mortgage broker can help you find a decent mortgage loan that falls in your range within a matter of days. They charge a nominal fee for their services as well. Paying a small amount in the beginning and securing an affordable mortgage loan is much better than being stuck with a huge, unnecessary burden for the next five or ten years.

Things not to do:

  • Avoid taking out a mortgage loan unless it’s absolutely necessary. It’s a massive commitment, and if you don’t plan accordingly, you might end up losing your real estate property too.
  • If you have just taken out a mortgage loan, you should avoid making any big purchases for the next two or three months. You might not even have enough money to pay for the down payment if you start splurging so quickly.
  • You should never forget the burden of home ownership. Remember, defaulting on a mortgage payment can lead to more serious repercussions than missing your monthly rental, for example. The banks might increase the interest rate to a figure higher than you can manage.