A mortgage is a type of loan that’s given to people who’re interested in buying property. Mortgages are typically the largest loans people will ever take out in their lives. Because of how large mortgages are (and how long a period they are paid back over) it’s important to do your research about them if you plan on taking one out.
Learning about mortgages can be difficult, especially if you haven’t got a lot of financial experience, or don’t understand lending jargon. Don’t worry though, this post will simplify learning about mortgages, by offering an easy-to-understand guide:
If you want to take out a mortgage, then one of the first things that you should do is check out a mortgage calculator. A mortgage calculator will be able to tell you how much you are likely to be able to borrow, according to your income (and your partner’s income, if you will be borrowing together). However, it’s also important that you use a calculator designed for calculating your mortgage with interest only, so you can figure out what your repayments are going to be. Interest rates are high at the moment, so it’s a good idea to bear them in mind. Just because you can borrow a certain amount, that does not for a second mean that you will be able to pay it back, considering global interest rates at the moment.
Something else that you need to think about is the lender you want to borrow from. There are lots of banks, building societies, and lending companies offering mortgages. However, if the lender you work with goes bankrupt, you could lose your mortgage. Because of this, you need to find one who’s reliable, has been open for a long time, and is performing well financially. Try to stick with a traditional bank, rather than an online one or building society. Global financial markets are very unstable at the moment and many financial institutions are on the brink of closing.
Shopping around is very important. You shouldn’t take out a loan of any kind until you have explored other deals and offers available to you. The easiest way to shop around for mortgage deals is to use a price comparison site. Price comparison sites show you all of the mortgage deals available to you, according to the amount you can afford to borrow, and what you want to borrow for (i.e., do you want a residential mortgage or a buy-to-let one?) When you use comparison sites, you sometimes get access to exclusive deals, like cashback, or products unavailable directly from lenders.
As mentioned earlier, interest rates are very high at the moment. The reason for this is the war in Ukraine and COVID-19. Both of these things have caused financial devastation. If you are interested in getting a mortgage, then you need to take some time to read about current interest rates. It’s also a very good idea to find a lender who’s offering a fixed mortgage. A fixed mortgage means you lock in interest rates for a long period of time, which will save you from having to deal with interest rate fluctuations. At the end of your period, you can then re-mortgage and get another fixed mortgage.
You can save yourself a lot of money on mortgage repayments by providing a sizable deposit. The larger your deposit is, the less you will have to repay monthly. A lot of people try to pay the smallest deposit that they can, but this is unwise. You can knock a huge chunk off of your total repayments by providing a large deposit. It might even be worth borrowing money from a lending company, just so you can provide your lender with a larger deposit. Most lenders expect a minimum deposit of 10%. Going up to 25% or more can get you a better deal.
When you are taking out a mortgage, you need to consider the additional fees that you are going to have to pay. You will have to pay a fee for your mortgage (which is about $500), as well as conveyancer fees. The conveyancer is the lawyer responsible for managing the mortgage contracts and ensuring that the person selling the house gets paid on time. Conveyancers are not cheap. Depending on where you live, there could also be taxes and other fees that you have to pay when you take out a mortgage.
Mortgages shouldn’t be taken lightly. If you plan on getting one, then make sure that you do your research, shop around, and provide as large a deposit as you can. Shopping around will help you to get the best deal. Use a calculator to figure out how much you can borrow, also.