First Time Buyers Guide to Choosing a Mortgage
A mortgage is a kind of loan used to pay for your home and is likely to be one of the biggest expenses in your life. Like all loans, you borrow an initial amount and pay it back over a period of time with the addition of interest. The key difference between mortgages and other types of lending is that they’re secured against your home – therefore the lender may sell it to recover their money if you are unable to repay the funds.
As a first time buyer, you will want to think about your budget carefully to see how much money you have incoming and outgoing, and how much money you have spare. The most urgent things to consider are the overall size of the loan, the rate and type of interest and what you’ll need to pay each month.
Although mortgages vary greatly, there are two main kinds: “repayment” and “interest only”. With a repayment mortgage, each month you will repay both the original sum borrowed and the interest. Over time you’ll reduce the whole sum you owe, and if you make all the payments you’ll own your property outright. With an interest-only mortgage, your monthly repayments cover the interest on the loan. You will later pay off the full amount, generally by placing funds in a long-term investment.
You’ll also want to look at types of interest-rate deals. Interest rates that are variable, like the standard variable rate, mean that your interest may change. This change … Read More