Buying a house is one of the most stressful activities we go through in life. With a bit of careful thinking in advance, you can take away some of the pain:
Do you want a fixed or variable rate mortgage?
Fixed rate mortgages offer certainty, certainty is expensive and so these would usually be more expensive than variable rate products.
However, if interest rates were to rise, so to would the interest rate on a variable rate mortgage whereas the fixed rate mortgage doesn’t move.
Don’t forget about the other fees!
Buying a house is an expensive business. Don’t forget to set money aside for stamp duty, solicitors’ fees, valuation fees, survey fees, mortgage arrangement fees…
Beat the LTV boundary
LTV stands for Loan-To-Value; this means how much of the home’s value the loan accounts for. A property worth £500,000 with a £250,000 mortgage has an LTV of 50%.
If you are near an LTV ‘boundary’ (95%, 90%, 85%, 80%, 75%, 70% etc) it might be worth that extra stretch to fall on the other side of it as most lenders use these boundaries to set their interest rates. The lower the LTV, the lower the interest rate. i.e. if you were putting up a £53,000 deposit for a property worth £220,000 you are effectively asking for a mortgage of £167,000. This represents an LTV of just over 75%. If you could gather together an extra £2,000 you would be looking for mortgages for less than 75% LTV. These rates would typically be better.
Do you want an interest-only or a repayment mortgage?
The majority of mortgages in the UK are repayment mortgages. Repayment mortgages, also known as amortising mortgages, are structured so that the whole loan is paid off by the end of the agreed term. Interest-only mortgages only require payment of the interest on the loan. These are more difficult loans to get as they require a separate plan to pay off the debt.
