For many of us, a mortgage can be a scary and complex thing. Taking out a mortgage is the biggest investment you’ll likely have in your life and getting it right the first time is a challenge.
Today we want to take a look at mortgages in a little more detail and help you to choose the right one for you. There are so many brokers and lenders out there that will try to offer you something you cannot avoid and this can result in you needing a lawyer like Tully Rinckey to claim back. But with our helpful tips you should be able to make the best decision for you and your family this year with no hassle.
Estimate that you can borrow
Before you start searching for a new mortgage you need to know how much you can borrow. You can do this by visiting a bank or building society website and filling out a few details about you. This is called a mortgage in principle and you will need this later on when you go to a lender. Never look for a house above your budget because this can be a big risk for you.
Think about your age
If you are under 50, getting a mortgage will be straightforward. But if you are approaching an older age, think about the term of the mortgage and how old you’ll be when you pay it off. If you are 50 and you take out a 25 year mortgage, and then retire at 65- that’s 10 years you need to pay a mortgage using your retirement fund. This is not the best idea for financial stability.
Interest only?
There is a difference between a repayment mortgage and an interest only mortgage and you need to be aware of it. A repayment mortgage is the standard service of paying back a small chunk of the mortgage along with interest each month, at the end of the term you’ll be done paying. Interest only allows you to pay only interest until the end of the term where you have to pay for the house. This is good in the short term but always consider the long term impact.
Fixed or variable rate?
A fixed interest rate stays at the level it was when you took out the mortgage allowing you to always pay the same amount for a term of 2,3, or 5 years. A variable term changes monthly with the live market and can dip and rise. The decision of which one to go with is up to you, but you need to consider the housing market and the likely trend in interest over the period.
Broker or no broker?
A broker will search for a mortgage for you and come back to you with a recommendation. However, a broker can sometimes be paid secret commission by the lender to bring in customers, so you might not be given the best deal. Be aware of this and consider cutting out the middleman and going straight to the lender such as a bank.
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