The year of the Covid-19 pandemic has been quite scary for many people with worries about job safety and money management. But a brand new year is just around the corner and with it comes a new confidence in decision making. Many people have decided to take the leap into a new property either through needing to upsize their existing home or moving from renting into home ownership. Whether you are taking on your first mortgage or looking to finance a new home the rules are the same when it comes to what you need to consider.
Take a Good Look at Your Budget
The first step is always to work out how much you can comfortably afford to pay towards monthly payments. Start by setting out a simple table showing your monthly income and outgoings. It always helps to get everything written down in black and white to give an accurate idea of how much money you can allocate for payments. Remember that when it comes to deciding how much you want to allocate you should always leave room for any rises in interest rates which can mean your monthly payments going up.
Talk to a Mortgage Broker
We are continually bombarded with TV and internet adverts which claim to offer the ‘best’ and ‘cheapest’ rates and it can be difficult to decide where to turn for mortgage advice. An independent mortgage broker has expert knowledge of the market and can help you with advice on what type of mortgage is best for you and which mortgages are available to you. They can even help with your mortgage application and can deal with some of the paperwork involved. Importantly, if you take out a mortgage which a broker has advised for you, you have some legal redress with the right to complain.
Study the Interest Rates
If you decide to go it alone, make sure you study all the stated interest rates along with the small print. Take note of whether the rate is available for your circumstances and whether or not it is fixed or variable. Rates which are fixed for a certain length of time can help you with budgeting but look for any steep rises after this period ends. Usually, if you can afford to pay a higher deposit you can find a mortgage with lower interest rates.
Types of Mortgage
The two main types of mortgage are ‘interest and capital’ or ‘interest only’. With an interest only mortgage you only pay the interest due and not the capital which means that at the end of the agreed mortgage term you still have the original loan amount left to pay. With an interest and capital mortgage, once you reach the end of the term you have repaid the full amount and you then own your property.
Look for Flexibility
If your income is variable for any reason, you may want to consider a mortgage that allows you to overpay without penalty or take a payment holiday if needed.