A Message About Mortgages

“Don’t wait to buy real estate. Buy real estate and wait”.- Will Rogers

Property Stock photos by Vecteezy

Buying your first home is an exciting prospect, but it doesn’t come without its challenges! Mortgages come hand in hand with purchasing a house, so it’s essential to get to grips with how mortgages work!

Understanding Mortgages:

A mortgage is a loan taken out to buy a house, rather than paying for the cost of the house up front. Typically, these mortgages last between 15 – 30 years. The individual with the mortgage, the “borrower”, repays the loan AND the interest charged, until they own the property.

What Are The Different Types Of Mortgages:

Fixed Rate/Repayment: Fixed rate mortgages involve constant interest rates for the entirety of the loan, reducing uncertainty.

Variable Rate: With variable rate mortgages, interest rates fluctuate over time. These rates tend to be determined by the lender but can also be influenced by external factors.

Interest Only: This mortgage type is less common. With interest only loans, you only pay-off the monthly interest. For example, if you were to borrow £100,000 on a 20-year interest only mortgage, you will pay interest on the loan and will still owe the initial £100,000 at the end of the term.

RENTING VS BUYING:

Of course, not everyone can afford to put a deposit on a house, so many people choose to rent. Renting simply involves paying a monthly sum to your landlord, but without owning the house you are living in. The 30% rule is a common rule used to work out how much of your income you should allocate to housing costs. For example, if you earn £3,000 a month, you should be looking to allocate £900 a month towards housing!