A Beginner’s Guide to Mortgages
Buying a home without a mortgage is something most of us can only dream about. Finding the right mortgage, however, is very challenging, especially after the 2008 financial crisis which has clearly revealed a number of weaknesses of the existing systems. In order to make the best choice possible, you therefore have to know your options very well but above all, you need to be realistic about how much you can afford to borrow.
Before you start looking for the best mortgage – the one with the lowest interest rates, you are recommended to inform yourself about different types of mortgages and both advantages and disadvantages of a particular mortgage. The thing is that the cheapest mortgage is not necessarily also the cheapest in the long term. And considering that mortgages are usually repaid only after 20 or 30 years, you cannot afford not to be careful in the selection of the best offer because your monthly payment can quickly exceed your financial capabilities and in worst case even cost you your home.
You can find plenty of information about different types of mortgages on this and other websites, however, please keep in mind that they provide only the basic information which can help you determine what are your options. The terms and conditions of particular types of mortgage can vary from one lender to another which is why it is a good idea to consider getting a professional advice. A FSA-authorised broker or financial adviser will increase the cost of your mortgage, however, he or she can give you plenty of good advices which will help you distinguish between different offers and choose the one that meets your needs and your financial capabilities the most. But even if you decide to get a professional help, you are highly recommended to take time to make some research on the issue yourself.
In addition to informing yourself about your options and making a financial plan for your new home, be sure to pay attention to the hidden costs which are often overlooked by the first time buyers. Various admin fees can easily add up hundreds or even thousands of pounds, while just about all lenders also require from you to take out life insurance in order to protect themselves in case you would die before you could pay off your mortgage. You will also be required to take out home insurance which will cover repair of major damage such as a fire for instance in order to protect the value of the property in case you would fail to replay your mortgage. In the end, you will have to put down a deposit because most lenders refuse to give 100% mortgages after the housing bubble burst in 2008. How much money you will have to raise up yourself depends from one lender to another but deposits typically account for at least 10% of the property’s value.