Purchasing a new home can be a wise and lucrative investment. For those who have never entered into the property market before, the most common option is to choose what is known as a first-time buyer’s mortgage. These vehicles will provide the potential homeowner with a number of interesting variables. Also, there are several differences between this type of loan and other mortgages.
Types of First-Time Buyer Mortgages
First-time buyer mortgages can be generally broken down into two separate categories: fixed and variable mortgages. A fixed mortgage is defined by a loan whose interest rate does not fluctuate over time. Therefore, monthly payments can be easily determined with the use of what is known as a mortgage calculator.
The second type is a variable-rate mortgage. Of course, this is defined as a mortgage that is paired with interest rates which will fluctuate over the lifespan of the repayment period. This can either be beneficial or costly. Should the predominant rates drop, the borrower will pay less over time. However, a rise in rates could very well equate to higher premiums; challenging for those who are within a tight budget.
Things to Take Into Consideration
It is important to note that lower interest rate are encountered when the applicant is able to pay at least twenty-five per cent of the total mortgage. Anything over thirty-five per cent will allow for the best rates on the market. Thus, a lower down payment will naturally equate to higher overall interest rates. There is the possibility to become involved in a mortgage that requires no deposit, but rates can be exceedingly expensive and one must boast a nearly impeccable credit history. This is all due to the fact that the lender will view the borrower as a higher risk if he or she has little financial stake in the mortgage itself.
Finally, always recall that only an amount which can be repaid in the future should be borrowed. Failing to follow this rule can result in damage to one’s credit, significant late charges and even repossession.
How to Get the Best Deal
Interest rates in the mortgage industry are highly competitive. So, shopping around at different lenders before making an ultimate decision is a wise choice. Other tips and tricks include:
- Determining the level of mortgage that one is qualified for.
- Employing the aid of an independent lawyer to aid in the buying process.
- Understanding the reputation of the lender.
- Establishing the flexibility of the lending policy (in terms of late payments or other financial issues).
These are all efficient to find the most appropriate first-time buyer mortgage on the market