First Time Buyers – How Do Mortgages Work?
Buying your first home is one of the most significant financial decisions you will ever make. Not many first-time buyers are fortunate enough to be in a position where they can pay cash for a property. For the vast majority of us, buying a home involves borrowing the money, which usually involves taking out a mortgage.
First-time buyers are often unfamiliar with the various aspects of a mortgage. This brief article aims to furnish you with the information you need to get you started on your journey to your new home.
Your Mortgage Deposit
The amount of cash you have available to put down as a deposit on your property will influence the terms of your mortgage. The larger deposit you can put down, the better and the most significant benefit will be access to more favourable interest rates. A considerable deposit will also give you more substantial equity in your home – we’ll cover this aspect of home purchase more in a later post.
The interest rate you borrow at will affect your level of monthly repayments. When taking out a mortgage, you should always remain conscious of its affordability. The interest rate at which you initially get your mortgage may rise, increasing your monthly payments, so take that into account when assessing your ability to repay.
There are other expenses you’ll need to consider when buying your property. These include your legal fees, mortgage arrangement fee, removal cost, surveys, home insurance, and possibly stamp duty. It is also shrewd to have some cash available for unforeseen expenses, such as replacing items damaged or misplaced during your move.
Affordability means different things to different people. It doesn’t merely come down to how much money you earn, but your lifestyle and how you spend your money.
In tomorrow’s post, we will look at affordability in a bit more depth.
See you then!