If you are thinking about buying property at some point in the future, then it is not a bad idea to try and make sure that you are fully aware of how mortgages work first and foremost. It’s only really by having a strong notion of how mortgages work that you can hope to get the right one for you, and that is one of the most important aspects to the whole process after all. Here are some of the main things that you will need to know about in order to fully understand mortgages and how they work.
The Down Payment
The down payment, or deposit, is one of the first things you will need to prepare for – as without it, you will not normally be able to get the mortgage in place at all. This payment is simply a percentage of the final price of the property that you are paying upfront in order to secure the property and the mortgage. It is normally 10-15% of the price, but it can vary and sometimes you have the choice of paying more or less. Obviously if you pay more, the benefit is that you are borrowing less through the mortgage itself.
Rates Of Interest
There can be a lot of considerable confusion around the issue of interest rates, so if you find yourself wondering about how these work, just know that you are not alone. The most important thing you need to know is that there are two types of interest rate: fixed and adjustable. With a fixed interest rate, it’s exactly what it sounds like: it’s not going to change over the course of repayment. An adjustable rate mortgage, on the other hand, is one where the rate can change over time – the selling point being that the overall rate is normally lower.
So where can you actually find a mortgage to secure for your property? There are a few places to look. You can go through a direct lender: this might be a bank or building society, or another similar institution. Or you can go through a mortgage broker, which can be hugely beneficial as it often means you are more likely to end up with the best deal for your position and situation. Either way, make sure you are shopping around before you sign your name anywhere.
As well as the usual mortgage types, there are other specialist kinds too that you might want to be aware of, and it’s a good idea to make sure that you are aware of these from the outset. These types of mortgages might include help to buy, right to buy, or a guarantor mortgage – this is where you have a named individual who promises to repay the mortgage if you can’t, and this often means you can get a lower interest rate where you might not have been eligible otherwise.
There you have it – now you have a decent understanding of your basic mortgage type.