Buying a house is a big deal and it will be one of the biggest decisions you will have to make during your adult life. Applying for a mortgage and going through the motions can be complex and intimidating the first time you do it, and you might find yourself sitting in the meeting with your mortgage advisor having no idea what you want or what you need.
But not to fear, here is a quick run down of the different types of mortgage you can choose and which one is the best for you.
There are two main types of mortgage in terms of interest and they both offer different things for different people. Here they are in a little detail before we get into which one is right for you.
A fixed rate mortgage means that at the time you sign the contract and buy your house, whatever the interest value is will stay the same for either, 2,3 or 5 years. It means that you are guaranteed to spend the same on your mortgage every single month for a certain number of years.
A tracker mortgage is a different style which changes throughout the term depending on the housing market and the National average for interest. There is an interest value which changes month on month and can either move up or down depending on the housing market, and each month you will pay whatever that value is at the time. It will change every month.
What’s your budget?
So the biggest question to ask yourself when looking at the different types of mortgage is what is your budget? You can use apps like The Ascent to help you cut mortgage costs and save you money, but choosing the right mortgage can also help. If you are short of cash when you first move into a house it might be easier for you to choose the fixed rate so you know where you stand, but in the same breath the tracker rate might be lower and therefore cheaper to buy. Make sure you do your research and check the trends to see whether it looks as if the value will hike up or dip down.
Are you financially stable?
For first time buyers who haven’t got used to paying to bills, broadband and a mortgage each month, the idea of paying out a huge sum of money can be daunting. This is why if you are still finding your feet in your career and you are not yet financially stable you must choose a fixed rate. This will allow you to count on the same price for a couple of years and give you the peace of mind to be able to live your life and get yourself to where you want to be in your career. Once the fixed term is up you can then choose another fixed term or a tracker depending on how financially stable you are.