A mortgage is something everybody will likely consider getting or will get in their lifetime. A mortgage is a loan issued by a bank or building society, or occasionally even a private lender, that pays for your home. Many of us will spend the rest of our lives repaying our mortgages month by month, and as these loans are often in the region of over £200,000, then we will be paying back at least £1,000 a month. Taking a mortgage out is not something that should be done lightly, rather it is important that you seriously consider all of the potential ultimatums. If you believe at any time in the future, you will be unable to pay, you should not take out the loan, as you can end up having your home taken away from you, and your life decimated.
There are things every single potential homeowner should know about their mortgage, and here are some of them.
Split Rate Mortgages
A split rate mortgage is essentially a division of interest that enables you to divide your mortgage into two separate parts, one variable rate interest, the other a fixed interest. The ratio between the two is completely subjective to the would-be mortgage takers’ wants. You can split the ratio of your mortgage to 70/30 if you wish and can decide which of the percentages has a fixed rate and which has a variable rate.
Many people are completely unaware of the benefits that can be had by taking out a split rate mortgage. One of the advantages of the split rate home loans is that if the interest rates on mortgages begin to rise, you will be protected, as a percentage of your mortgage will be a fixed rate and your repayments will not grow in cost. However, a disadvantage is that if the interest rates fall, you will still be liable to pay your fixed rate.
The variability of the loan gives you the ability to make as many payments as you need in addition to your pre-existing payments, meaning you can completely purchase your home and complete your loan without having to wait for the fixed determinate period as per your agreement if it were not varied. For every first-time homeowner, a split rate mortgage is surely something to take into consideration.
Your Credit Score Is Important
When you are taking out a mortgage for the first time, you should go into it with a pristine credit score. If your credit score is appalling, the chances of you getting a mortgage are very slim, which is why for the time leading up to you going for your mortgage interview you should ensure that you employ strategies to improve and perfect your score. This means paying back credit cards, phone contracts, and loans. Many people are frivolous with their credit scores, while others are fervent. It is best to lean toward the latter in this situation, as by neglecting your credit score and allowing it to become poor, you will risk closing many doors in the future.
If you have any defaults on your credit score unless you can find a lender who would accept them. It is suggested that you wait for the fixed six-year period before making a mortgage application. If you make a mortgage application and it is denied, this is known as hard search, and this will bring your credit score down even more than it is at the moment. You should avoid hard searches as much as you possibly can.
Bigger Deposits Are Better
When taking out a mortgage for the first time, you will be expected to pay a deposit of around 5-10% of its actual cost. If you can increase this, even by a few percent, you will be doing yourself a great service. By paying more toward your mortgage at the beginning, the monthly repayments will cost less, and your mortgage period will also lessen. This is a fantastic way to ensure should any financial disaster occur in the future, that you will be somewhat protected; the more you can reduce your payments, the better you will be in times of hardship.
The initial deposit is something you should consider before signing your mortgage agreement, and you should put as much money toward it as you can. If you are taking a mortgage out with a partner, then this step may be a lot easier.
Now you know three important things about mortgages and hopefully, when it finally comes to you signing a mortgage agreement, or considering taking one out, you will be in a better position to do so. Your home is your family’s security, and you should be fervent and determined to get the best mortgage deal you can.