Buying a house can be stressful in any circumstances, but especially if it’s your first time. Making that huge financial decision to purchase a property is not something to be taken lightly. A lot of research is required before you reach this stage so we’ve put together a brief guide to help you start your journey:
What is a mortgage?
Basically, it’s a specialised loan designed to help buyers purchase a house. With the average house price in the East Midlands being £195,707 in January 2020, most people are unable to pay this upfront and so mortgages were developed to help make this possible.
When buying a house, you will have to put up a deposit (usually between 10 and 20% of the property value) and the bank will front the rest of the money. You will then have to pay the bank back on a monthly basis over a set amount of time using a pre-agreed payment plan.
For example, if you bought a house for £200,000 on a 20-year term with a 15% deposit, you would then owe approximately £709 a month (plus interest) to pay back this loan.
Interest
What complicates a mortgage more than anything is the amount of interest charged on it. This fluctuates year-to-year meaning it can change a lot over an extended mortgage term. Many mortgages offer a fixed rate over the first 2-5 years, meaning the interest will be fixed for that period of time. However, when this fixed term runs out your mortgage rate will either need to be renegotiated or become subject to real-time market fluctuations.
You can also have a variable-rate mortgage for the entire term, meaning the amount you pay is calculated by the current market interest rates. Although this has the potential to save you a considerable amount, it can also do the opposite. For a lot of people, trusting the rates won’t go up over the 20+ years that their mortgage will be repaid is too much of a risk, so fixed-rate mortgages tend to be more popular.
Securing the Loan
As you may be aware, the number of mortgages on the market at times seems to surpass the houses themselves! Narrowing down on these options is no easy feat, but it pays to do your research and secure the correct loan.
For each mortgage, the provider will take a look at your individual financial circumstances including your credit score, income, spending habits, and deposit before deciding how much they are willing to lend you and on what terms. This is the best and most reliable way to figure out what you can realistically afford. At this stage it’s advised you get a quote from multiple providers so you can compare and find the best, most realistic rate.
How We Can Help
At Simpson and Weekley, we offer complimentary financial services to all of our clients, allowing them to find everything they need in one place, as well as access to a team of expert financial advisers to help you every step of the way on your property journey. From mortgage advice, to insurance, to market expertise, contact Simpson and Weekley today to find out more.