One of the things that are often said about the process of buying a home is that it is one of the most expensive endeavors that you will ever undertake in your entire life and to a large extent that is true.
The thing that makes property one of the most expensive commodities available is that it is something that will always be needed and, if the property is particularly desirable, wanted on the open market. So naturally unless you have a large lump of cash in your account or a preexisting property to sell or re-mortgage you will have to find some avenue of finance to secure your new property.
The need for housing combined with the amount of property and actual price of an average house on the property market being so high has actual created a whole sector of the finance industry that is solely dedicated to providing these kinds of funds for the purpose of buying houses.
It’s an incredibly complicated and delicate area of finance and requires a great amount of consideration and planning in order to make sure that you get the best deal and that everything is above board and legal. So let’s look at a few things you should really pay attention to during this confusing time.
Interest rates are the amount of the loan that you will end up paying to the provider of your mortgage on top of the main principle of the loan. The number that you see is representative of the percentage of the total loan that will be charged every month, and usually there are two ways that this interest is calculated, which is a fixed rate mortgage or a variable rate mortgage, so let’s take a look at both:
Fixed Rate – Fixed rate mortgages generally pertain to the base interest rate that was set by the financial authority for your location at the time of signing the agreement. This rate will not change which is one of the upsides but also a downside. You won’t necessarily benefit from any decreases in the interest rates over the coming months and years, but neither will you be negatively affected by them if they happen to go back up further than originally agreed, because your rate is fixed.
Variable rate – Variable rate mortgages are somewhat a double edged sword, while they are definitely the more flexible of the two options and they have a number of benefits they also have a few drawbacks that should be considered. Yes they do give the possibility of saving a fair bit of money in good financial times when everything is steady on the market and with the provider themselves.
If the bank lowers their interest rate significantly then that means that the principle of your loan will be paid back quicker as there is less of your payment going to the interest and is going towards the principle instead, which in turn brings lower payments. However, the major drawback is that if the market happens to shift or the company you secured finance from becomes less profitable ultimately, interest rates will go back up and you will end up paying more interest and less of your principle.
It’s important that you carefully work out what kind of mortgage will suit your finances and local market better.
Broker vs. Bank
There are two main ways that most people will consider when it comes to finding the best deal that they can. The most common of which is too look at a selection of the high street branches of the large chain banks that operate in your country.
Often times these will be very well advertised online, on the television and in newspaper, the main advantages of choosing one of these mortgages is that they are extremely easy to find and they generally provide a quick turnaround time and good service, however they may not necessarily be the most flexible in terms of interest rates and obviously once you ch0oose a bank they can only offer your avenues of credit within their company.
Whereas a good home loan and mortgage broker, while not having the big extravagant waiting rooms and perhaps not being quite as well staffed can actually do a lot of the legwork for you when it comes to choosing the best mortgage for your finances and can explore multiple providers of credit while at the same time working to get you the lowest interest rate.