Buying
a house can be stressful and because it’s probably the most expensive
thing you will ever own, it’s best to consider all the options open to
you.
Let’s start with the basics, what are mortgages
and how do you get one? In short, a mortgage is a loan exclusively used
to purchase a property. The property is used as collateral to ensure
the client pays back their loan and the lender can repossess the
property if the borrower doesn’t maintain the agreed repayments.
Getting
a mortgage is likely to be harder now than ever before due to steadily
increasing house prices resulting in lenders being more careful. If you
want to find out more about obtaining a mortgage, your best bet is to
seek professional advice. One of the essentials to check is whether a
mortgage can be transferred to another property if you want to move
house before the current mortgage expires.
You can search
online for an Independent Financial Adviser (IFA), or a local mortgage
consultant will be able to help you. However, with such an important
decision, you can never do too much research; make sure you don’t act
on the advice of the first adviser you contact.
A mortgage is
comprised of two parts, the principle borrowed and the interest levied
on the loan by the mortgage lender until it is repaid. Think long and
hard about how long a term you want to pay back your mortgage over, how
much you can afford in monthly repayments, and how much money you can
afford to borrow on the property at the beginning.
First time
buyers can be particularly vulnerable to some elementary errors. If you
get an interest only mortgage, you pay only the interest each month on
what you have borrowed. This might suit people who want reduce their
monthly payments, but at the end of the ‘mortgage term’ you will still
owe the full amount of the original loan.
Other repayment
methods include capital and interest repayment, where you pay the
interest and part of the capital sum borrowed each month. Perhaps the
safest option is to choose a part and part mortgage which allows you to
choose between paying interest and capital every month. A mortgage calculator can weigh up the pros and cons of particular packages to determine which option would be best for you.
Here
is a quick run-down of a few options available to you: variable rate
mortgages involve payments that are subject to change; how much they
move up and down is determined by the interest rate charged by your
mortgage lender. This can be a risky option because while rates may
start low, as they are at the moment, they may well rise later
according to the base rate.
Because of this, many people
choose a fixed rate mortgage where you agree the rate of interest from
the outset. This means monthly repayments are the same throughout the
term of your mortgage.
However, you will miss out if general interest rates drop. You can find a good first time buyers guide online; and with the Internet, you have all the information you need at your fingertips.
