If you’ve previously only ever rented, getting a mortgage on a property can feel like a big step forward. Feeling nervous to get started is understandable, but the more you can read up on the subject, the more comfortable you’ll be during the process.
No matter how much or little knowledge you have on mortgages, this article will help you to prepare to buy a house, covering all the basics of mortgage lending.
What is a mortgage?
Let’s start at the very beginning. A mortgage is a means of paying off a property that most people, if they’re buying and not renting, will go for.
A mortgage allows you to split your payments up into manageable monthly instalments, rather than paying for your entire property upfront – which is nearly always impossible. You can choose how long you’d like to pay your mortgage off for, depending on how much money you can put towards each payment.
What are the advantages of taking out a mortgage?
Generally, if you’re taking out a mortgage as opposed to buying outright or using a loan provider, you’ll find that the advantages are as follows:
- Mortgages are a cost-effective alternative to other loan providers, with lower interest rates.
- Mortgages allow you to pay of a sum of cash over a far more lenient stretch of time, and give you the control to pay your mortgage off at a rate that suits you
- You can often find discounted deals on mortgages, thanks to the competitive nature of the industry
- You have the option to work with a mortgage broker, who can manage the whole loan process for you
How do I find a good mortgage lender?
Just as lenders want to find trustworthy mortgage payers, you, as the payer, want to find a trustworthy lender. Do your research, and compare lenders online for the best deals. Always look at reviews, and take a look at the top mortgage lenders of 2019 for inspiration.
What’s a deposit and why do I need one?
You might have heard people talking about deposits when it comes to purchasing a house. There’s no avoiding deposits in buying and renting situations, but mortgage deposits are a bit different. A deposit is a lump sum of money that you’ll be expected to pay upfront to secure the property. Normally, you’ll be expected to put forward money equalling at least 5% of the full cost of the property, although higher deposits sometimes give you a better deal on your mortgage.
What are mortgage interest rates?
Speaking of better mortgage deals, the type of deal you get will usually be determined by the interest rate you’re offered. The lower the interest rate, the better, and this is determined by your credit score. A poor credit score may present you with difficulties even finding a mortgage lender who will give you a deal, and the interest rates offered are likely to be sky-high. Always keep your credit in mind if you’re planning to take out a mortgage soon.