If you’re thinking of buying a house, you’re about to make the most expensive purchase of your life. Having your own home for your kids to grow up in is a dream for most people so it’s important that you have all the facts to hand when making this important investment.
Things like garden size, school catchment areas and living distance between family and friends all play a part in sculpting the final decision. It’s all very well finding your perfect home location, but can you afford it? This is the dilemna facing most people and thus the search for an affordable mortgage begins.
Have you gone for the right sort of mortgage? Did you get the best deal for my mortgage and most importantly, can you afford the monthly mortgage repayments?
Below is a list of 10 points to consider when making this decision, designed to turn worried novices into clued up experts.
1. Making a budget
You should always draw up a budget once you’ve decided to buy a house. If you are a first-time buyer and your calculations show you can only just afford the monthly repayment on a low interest rate, perhaps you should think again. The website www.moneyadviceservice.co.uk has some useful tips to bear in mind when choosing a mortgage provider.
2. Make sure you know the difference between mortgages
The language used by building societies can be baffling. If you get a tracker mortgage you’ll have to be aware of the Bank of England’s base rate. Make sure you get well acquanted with financial terms and legal jargon. When your child is working on their homework, why not join them and do some research about this?
3. A discounted mortgage
A discounted mortgage is tied to the Standard Variable Rate (SVR). You could use the Money Advice Service to calculate which type of mortgage will suit you best.
4. Shop around
Because mortgages vary so much, it’s a good idea to shop around. You could also ask the advice of an Independent Financial Advisor (IFA). If you already have a mortgage and wish to move house, you could always see if you can get a good deal from your existing building society.
5. Fees differ
As well as the actual cost of the mortgage you’ll also have to take the broker’s fees into account. Remember you’ll probably have to pay stamp duty as well as legal costs, surveyor’s fees and, when you’re selling, estate agents’ fees too. And don’t forget to take out an insurance policy. You can’t have a mortgage if you don’t have insurance.
6.Mortgage rates â€“ five year fix
The Guardian has an informative piece on what happens if interest rates rise and the importance of looking at five-year fixed rates in order to cope with this eventuality
7. Mortgage rates-two year fix
Some people are better suited to a two year fixed interest rate. These tend to be cheaper than the five year option but you might have to pay higher fees. In any fixed deal, if you wish to leave the scheme early you will have to pay an exit fee.
8. Look at the smaller building societies
Everyone is familiar with the large national chains of building societies, but some of the small local firms may be able to offer you a better deal. They will be very familiar with the market and can offer good advice.
9. The Annual Percentage Rate (APR)
You’ll become very familiar with the term APR. If you look at a comparison table you’ll see that prices can fluctuate and an APR is in addition to the interest you’ll have to pay on your mortgage.
10. Mortgage Market Review (MMR)
The MMR was set up to reform the mortgage market to ensure people are only given a mortgage if they can actually afford one and every mortgage seller is required to hold a relevant qualification to do so. The majority of the changes it introduced came into effect in April this year.
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