loan search for homeowners

There are many types of mortgages but no matter which one you choose it will initially cost you money, even if you opt for a 100 per cent mortgage.

In the first instance, you find a home to buy and approach a mortgage lender to provide a loan to help you pay for it.  You will be looking for a mortgage or remortgage with the lowest possible interest rate.

The interest rate is the most significant thing about a mortgage. Each of the mortgage lenders has its own standard variable rate (SVR) of interest. These can vary by several per cent, although most mainstream lenders will be within a couple of per cent of each other.

The lower the interest rate the less money you have to pay back over the mortgage term.

However, before you start paying back your mortgage you will have to pay set up fees also known as an arrangement or a reservation fee, and it can be anything from a couple of hundred to several thousands of pounds, depending on the mortgage you choose.

When you first buy a home you will also have to insure it against disasters, fire and theft. Your mortgage lender will also expect you to insure your life in case you die during the mortgage term, so that the loan can be paid off.

If you don’t do this and the worst happens and your dependants can’t keep up the repayments, they could be left homeless.

You can also choose to insure your monthly mortgage or remortgages payments, known as a payment protection plan, so that they will be covered if you lose your job or become too ill to work.

When buying a home, it is important to consider that the value of the property must rise over the mortgage term in order to make your investment and mortgage a reasonable and profitable investment.

The value of the property will usually rise significantly because of inflation – but there is no guarantee. If it does, the amount you borrowed will seem smaller compared to its final value.

Also, the total amount you have paid the mortgage lender will be much more than the original cost of the property. For example, once you take the interest into account, a £100,000 house could easily cost £250,000 to buy over 25 years. However, the value of the house will probably be worth double that at the end of the mortgage term.

When you are looking for a mortgage or remortgage there are a number of factors you must consider including the amount, the term, the type of mortgage, the type of interest deal, the length of the deal and the lender.

The amount will depend on a combination of factors, including the price of your chosen property, what you can afford and what your mortgage lender is willing to lend you.

The term you can sign up for a traditional 25-year mortgage term – or borrow over a longer or shorter period.

The type of mortgage you can opt for a is a repayment mortgage or an interest-only mortgage and the type of interest deal most people go for a fixed-rate or a discounted variable interest deal – although there are other options.

The length of the deal fixes and discounts can last for anything from a few months to your full mortgage term. Deals lasting two to five years are most popular and the lender could be a bank, building society or other financial institution. Shop around the high street banks for the best deal as they are often very competitive.

Buying a home is probably the biggest investment most people will make. However, when deciding to take out a mortgage it is important that all the initial costs are considered as well as your monthly payments compared to your income. Paying back a mortgage is often more expensive then paying rent and many might find it a struggle initially to learn to save and also pour their own money into the maintenance of the property.

Before taking out a mortgage, borrowers must also consider the initial costs, such as an arrangement fees, solicitors fees and surveyor fees, and set a savings plan to assure a payment is never missed. It’s also only advisable to get a mortgage only if you are sure your financial situation is not going to change in the foreseeable future and you have job security.  

The author is Melinda Varley who an experienced journalist currently specializing in articles for the financial field. Melinda has held several positions for magazines and newspapers both hard copy and online and both in the UK and Australia which is where she originates from.

This article does not represent ‘financial advice’ as each person's individual requirements will be unique to their needs. If there is something in the article which you wish to rely on then please check those details with the person with whom you arrange a secured loan, remortgage or any other financial service.

The views in this article represent those of the author and not those of Netbasic Limited.