Many people talk about taking out a mortgage, but very few understand what this actually means. This is a massive financial commitment; probably the biggest one you’ll ever make in your life. That means you need to make sure that it’s the right thing to do for you. You also need to make sure that you can afford the repayments, or you could end up in some financial trouble. Read on for some mortgage advice for the total novice:
What is a Mortgage, Exactly?
A mortgage is a loan that you take out with a mortgage provider, in order to buy property or land. Mortgages usually last for 25 years, but depending on your circumstances you may be able to get one for more or less time. If you fail to pay your mortgage, the house will be taken and resold to repay what you owe them.
To take out a mortgage, you need to contact a building society, specialist mortgage provider, or bank. They will make sure that you can afford the mortgage.
There are 2 parts to your mortgage; the capital and the interest. The interest is the money added on to your repayments each month until you’ve paid off the full amount. The capital is the money you borrow.
You may have heard people talk about a mortgage deposit and wonder what they’re talking about. The deposit is a chunk of your own money that you’ve saved up and put down on the house. This is expressed in percentages; for example, to put down a 20% deposit on a £200,000 house, you would need £20,000. Usually, the more money you can afford to put down on your house, the lower your payments will be each month.
What You Can Afford
It’s so important that you know what you can afford. Remember, circumstances could change; you could have a baby, for example, which may make it harder for you to pay off the amount you owe each month. Due to people failing to pay the mortgages they thought they could afford, banks are making it increasingly harder to get a mortgage. The estate agents in Stourbridge warn that plenty of proof is needed. They’ll also ask you questions about changing circumstances, regarding things like babies.
Getting the Right Deal
Getting the right deal is the next important thing to know. When I say get the right deal, I don’t mean the best, cheapest deal. I mean the cheapest deal that suits you the most! In order to do this, you need to have a few things in place:
- A large deposit. The more money you have, the better!
- A cash cushion. This will make you look more attractive to lenders.
- A great credit score. Make sure you pay all of your bills on time, you have no outstanding debts, and that there are no mistakes on your record.
Depending on your circumstances, you may need more things in place to show that you can pay for this mortgage. Good luck!