For most people, a mortgage is the most important financial product they will ever get, and certainly the biggest sum of money that they will borrow at one time. Getting it right, then, is absolutely vital, but with a lot of different options out there, knowing who to go with, or what options to take can be tricky. Here’s a quick beginner’s guide to mortgages.
Maintaining Payments
At the heart of any mortgage is your ability to maintain payments, part of this involves borrowing the right amount for your income, but another element is making sure that your mortgage is paid if you can’t earn. This protection can come in the form of mortgage insurance, or critical illness cover or a number of different forms of insurance, but if you have people who are dependent on you, it’s a good idea to consider.
Interest Rate
Many mortgages offer introductory rates, or the option to fix, or a range of other complicated financial terms, but what you want to look for is the SVR. SVR stands for “Standard Variable Rate” and after all the bonuses and introductory rates are over, this is how much you pay. Unfortunately, it can change from month to month, but it’s more important to look for a low SVR than a low introductory rate.
Interest Only
If you’re just getting onto the property ladder, this option could be for you. An interest only mortgage is one where you only pay the interest on the sum you’ve borrowed to buy the house. It means lower repayments, but that at the end of the mortgage term you don’t own the house, you still owe the original sum you’ve borrowed. Still, it can be a cheaper option for the short term and is worth asking about.
Long Term Calculations
The most important thing with a mortgage is working out how much you’re going to have to pay overall, so make sure that you use something like a mortgage calculator to work out what represents the best deal for you. This will tell you have much you have to pay each month at certain rates, and with certain amounts of deposit. The key thing with this is to make sure that you borrow enough for your income, not enough to buy the house that you want to.
Additional Features
Do you think you might need to skip a payment once in a while? Do you think you’ll be in a situation to pay your mortgage off early? These are two big considerations and both eventualities tend to come with financial penalties from most mortgage brokers, it’s worth taking these into account when you start looking because if you are allowed to skip the odd payment, it could well be very useful, so it’s worth keeping an eye out for.
