Buying a property can be a daunting experience. It’s bound to be the most expensive thing you ever do. House prices are eye-watering for many. What’s more, mortgages can be confusing and stressful. There are lots of different choices in the market. You need to be sure that you choose the right one for your home and your income level.
You can’t just assume that you’ll get the best deal. Around 31% of us pay more in rent or mortgage costs than we can afford. That shows that we’re not getting these decisions right often enough. You can’t afford to make a mistake in this area. Many of us aren’t experts on mortgages. Don’t panic. The options are easy to understand and simple to explain.
A mortgage is like a giant loan for a property. There are many different types of mortgages. The first is a fixed-rate mortgage. Every mortgage has an interest rate. That’s the extra amount that you pay back to the bank as well as your initial loan fee. In the UK, these rates follow the base rate from the Bank of England. At the moment, that rate is 0.5% and has been for several years. Experts believe it will rise soon. A fixed-rate mortgage has the same interest rate level for the whole life of the mortgage. It doesn’t matter whether the Bank of England’s rate rises or falls. That could turn out to be a great deal if the rate goes up. You’ll make more money on any savings, and your mortgage costs will stay the same. If the rate falls, you could end up out of pocket. Fixed-rate mortgages suit those who value certainty and stability.
Tracker mortgages are different to fixed-rate ones. As the name suggests, they track the Bank of England’s base rate. Of course, they stay above it, or the bank wouldn’t make any money! These mortgages are flexible, and they become cheaper or more expensive over time. If you think that rates will stay low, they’re a great idea. They can punish you when rates rise, and a hike is due anytime soon. Be careful with tracker mortgages. Some banks are under investigation for manipulating rates on them.
These mortgages are best for savers. An offset mortgage combines your mortgage with your savings account. They help you to take advantage of savings accounts that don’t have high rates. That’s because they’ll use your savings to cut the balance of your mortgage. Today, as low interest rates hit savers, they’re a good idea for many people.
If you’re still confused, you can consult guides for step by step help to buying a property. What’s important to remember is that you must be sure about your mortgage before you sign. A mortgage is a massive commitment. You should ask lots of questions and be certain about the right route for you. Take care to get as much information as possible. If you do, your mortgage will be as safe as houses.