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Getting a Mortgage Part 1
Edwina / Published on August 1, 2013
Unless you can pay for your property outright, you’ll likely obtain funds from friends or family, or take out a mortgage. Before doing this though, there are some very important things to think about. Read on for our two part series on what you need to know before taking that big step.
The key is to plan in advance. Having a better credit rating and paying a bigger deposit will open up more options when looking for a good mortgage deal. You can check your own credit but be careful because if you do it too often it will impact your credit footprint. You can find a free service here.
What mortgage rate you get is dependent on the size of your deposit. If you can afford to put down 25% of your property value, you’ll be looking at some of the best rates, with the cheapest being putting 40%. Don’t fret if these hefty numbers are putting you off, as the deals for 10-15% deposits have improved significantly. Make use of this savings calculator here to find out how much your monthly costs will build up.
There are two types of mortgage: variable and fixed rates. There are two types of variable rates, tracker and standard variable. Tracker mortgages depend on the benchmark interest rate set by the Bank of England – the base rate. It increases/decreases to reflect this. Standard Variable rates are specific to each lender. These are usually influenced by the base rate but can also change quite drastically independently of it.
Fixed rates are fairly self-explanatory; your interest rate will remain fixed for a set period of time, so your monthly payments will be the same each time. Once your period for fixed rates has finished, the rate will revert back to the lender’s standard variable rate, which is an ideal time to assess the market and find a better deal. First time buyers might be more tempted by the fixed rates but if you do go for a variable rate, it might be wise to opt for the tracker as opposed to standard variable – this way the rate cannot impulsively be changed by the lender.
Check back in tomorrow for part two of the series!