Taking out a mortgage can be a bit of a minefield as there are so many out there to choose from, and so many different things to consider when you’re choosing. Here are a few tips to help you along the way.

Plan ahead
Don’t rush into anything, take your time and read up on the different sorts of mortgage that are available. Learn about trackers, fixed rate, variable rate, offset and interest only mortgages. Gather information and then decide which type is going to suit your income and lifestyle best.

Work out what you can afford
Lots of places will offer you mortgages based on what they think you can afford, but do your own calculations. Write a plan of your incomings and outgoings and look at how much per month you can easily afford to pay, and remember that you’ll need to stay well within that budget because of possible interest rate increases.

Shop Around
Don’t just walk into your bank or building society and go with what they offer you. There are lots of mortgage calculators online, and lots of places you wouldn’t think of that offer mortgages now. Banks and building societies aren’t the only places that sell them, even supermarkets are offering them these days. Mortgage advisors can be good people to talk to as well, as long as they don’t charge you for the privilege – some charge a fee, but others get their money by taking a fee from the mortgage seller rather than from you so make sure you ask that question up front before you speak to any.

Don’t forget to look at the extras
Don’t forget to include the cost of extra things like mortgage insurance if you’re going to take it out. It’s easy to forget to include these things in your calculations and then find yourself overstretched financially. Also make sure you look at hidden costs within the mortgage as well – these can be things like exit costs (the fee when you transfer away from the lender), and early redemption charges (these are the fees charged if you pay off more than you’re allowed to during the first few years of your mortgage). Remember also to include the costs of solicitors’ fees – this may be a one off fee, but if you’ve not budgeted for it, then it can be a costly mistake.

Do you really need it…
Some mortgages – particularly those aimed at first time buyers – come with ‘extras’ like cashback on completion for example. This sort of thing sounds like a great deal, but do you really need it? Don’t forget that you will pay over the odds for that cashback in the long run because you’ll be paying interest on it for the full term of the mortgage. So think hard before you go for something like this.

Get Saving
This is particularly important if you’re a first time buyer, as you will usually get better rates on a 95% or 90% mortgage than you will on one which is a 100% mortgage. This is because if you have some of your own money to put into the place, the lender knows you’re a better risk than someone who’s got nothing to put into the deal.

Beware of payment holidays
Payment holidays can be an absolute godsend if you become unemployed and need to take a break from paying for a month or two while you change jobs, but do try to avoid taking them if you can. In the long run, they will mean you’ll pay more money out because of the extra interest that will build up.

For information on Fixed Rate and Variable Rate Mortgages click here.
For information on Offset Mortgages click here.

by Vialdana