When you’re searching for a new home, the ‘m’ word can be the scariest part of the whole process. There are so many people out there offering ‘great rates’ and ‘guaranteed loans’, so how do you know who’s who and what’s what? It may be a tricky concept to get your head around, but we are here to bring you up to speed on all the basics.
In short, a mortgage is a loan from the bank that is secured against the value of your home. Usually they run for around 25 years, during which you pay installments in order to pay off the loan.
Yes, it may sound scary – but is doesn’t have to be! To get you started, there are a just a few key terms to know.
“Capital” – the money you borrow.
“Interest” – the charges you incur from borrowing money.
“Deposit” – the money you contribute upfront to the overall cost of the property.
Luckily there is a mortgage out there for everyone, but these are the two most common types: repayment mortgage and interest only mortgage.
With a repayment mortgage, you pay back some of the capital and some of the interest on the loan every month. With an interest only mortgage, you only pay the interest on the money lent.
To help you figure out your budget, there are loads of great tools out there such as The Money Advice Service mortgage calculator. You can find it on their website or at http://bit.ly/1RFBwpC.
So what happens when you find your perfect home?
The next step is to fill in a formal mortgage application form. The lender will then check out your financial situation, help you figure out what type of mortgage is best for you and what size deposit you can make. The Help-to-Buy scheme is a great helping hand put in place by the government, targeting young, first time buyers. It could be perfect for getting your deposit down and making it easier to buy!
Next there will be a credit check and a few documents to go through, once this is complete you’re nearly there! You’ll receive a mortgage offer letter which needs signing and returning.
Lastly, make sure you read the small print! It is boring, but it’s really important too. If you have any questions, your lender should always be happy to help you out and take a minute or two to explain everything.
So don’t stress, it’s easier than you think! Try to enjoy yourself – it could be the start of something amazing, in your very own home. Have you got any advice for first time mortgages? Let us know below!
[Image sourced from Blue Diamond Gallery]
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