For most people a mortgage is the biggest financial commitment they will make in their lives. Whilst the purchase of a house is a very exciting time, it can also be quite daunting and stressful. This guide brought to by moneysupermarket.com is designed to help take away some of the stress by simplifying your search for a mortgage.
To begin with, mortgage loans are made up of two basic elements:
• The capital which is the amount of money you borrowed in order to buy your property.
• The interest which is the amount of money your mortgage provider charges you for borrowing the money.
There are lots of different phrases and names floating around for mortgages but for the most part there are two mortgage options that are most commonly taken out. For most people the choice is between either a repayment mortgage or an interest only mortgage.
There is a third type of mortgage available which is known as a current account mortgage, but this type of mortgage is a lot more complicated than the two mentioned previously and isn’t as popular with buyers.
Quite often mortgage companies make things seem really complicated when in actual fact they need not to be. The two most significant things about any mortgage are the interest rate and the mortgage fees
When mortgage companies offer attractive introductory offers such as low interest rates they can be slightly misleading as often higher fees come as a result of the reduction on the interest.
Deals with low fees or even no fees at all often come with high rates of interest. As a potential borrower the trick is to become savvy to this. It is vital that you are aware of and understand the way interest will be charged.
Interest is charged as an annual percentage of the amount you first borrowed.
If you borrowed £100,000 and the interest rate was 6% for the year then you would have racked up £6,000 of interest. Interest rate can be variable, fixed or capped.
An easy way to work out the expense of an mortgage is to use an online mortgage calculator. This can be used to work out not only how much you can borrow but what your monthly repayments might be.
It makes sense to research the costs of different types of mortgages before deciding on which to take out. A mortgage is often the biggest debt a person will incur throughout their life, yet it is a good debt if you can manage the costs properly.
For more advice on mortgages visit moneysupermarket.com where lots of helpful guides can be found on a range of topics including cheap home insurance for your new home.