Buying a home is serious business and finding suitable funds and a mortgage to finance the deal takes tenacity. Many different lenders exist and they all offer various types of loans and repayment methods.
If you want to do your own calculations, instead of waiting for advice from lenders, you can do so using a mortgage calculator which will give you quotes from a variety of lenders and make sure they are reputable lenders.
Table of Contents
1. Mortgages You Can Afford
It is important to keep your mortgage affordable for now and, importantly, also in the future. Ensure that you will always be able to afford your monthly repayments.
You can opt for a fixed interest rate. This will be in your favor if the interest rates go up but if the rates go down, you are stuck at the higher rate. An amortization schedule will also help you in visualizing your payments.
If you opt for a standard variable rate, it means that your interest rates will go up and down as the country’s rates change. The downside here is that it will not always be easy to plan ahead.
2. Know Your Mortgage Features
Mortgages have different features. With a cash back deal, the lender pays you a large lump sum shortly after you have taken the loan. This could be as much as 3-5% of the borrowed amount.
In the event that you change your mind or would like to take up a better deal with another lender early on during the loan, you might have to pay back a portion or even the whole amount that you have received as cash back. If you do not have the funds, you can come up short.
3. Mortgages On Offer
Various types of mortgages are on offer. If you select an interest-only mortgage, you will pay back the interest only. This will ensure a low monthly repayment but the loan amount itself will not be reduced.
Do not forget that the loan must be paid back at the end of the term and it would be a good idea to know from the start how you are going to do this.
4. Endowment Mortgages?
An endowment mortgage is designed to cover the interest-only mortgage repayments when the term comes to an end. The amount may, however, not be enough to cover the bond.
5. Planning Your Financial Picture
The most important thing to do when you are considering buying property is to do a proper budget. The budget should show your monthly commitments and tell you whether you can afford to buy a house and for how much.
Bear in mind that you will not only have the mortgage repayments to take care of but you will also have life insurance on the house as well as insurance on the house itself.
You should add up all these amounts and add that to your monthly budget to see whether you can afford to buy and by how much.
It is also necessary to have a small fund for unforeseen emergencies. You cannot tie up all your money with a mortgage loan and then find you do not have cash available. Houses need maintenance and children can fall ill. Prepare for such eventualities.
Do proper homework about the funds and mortgages that are available and decide on the best one for you.