After securing your MIP, one of the key decisions you’ll need to take is what type of mortgage you want. The options you’ll usually see are:
Fixed-rate mortgages give you a lot of security from day one: you know what payments you’ll be making for years in the future. However, if interest rates drop during your fixed term, you won’t be able to take advantage of the lower rates easily. This isn’t a problem with tracker mortgages- although if interest rates rise under a tracker mortgage, you’ll end up paying more. SVR mortgages are the least transparent of the three: the lender can decide to raise or lower rates as they please.
Another mortgage option that you might see is an interest-only mortgage. In an interest-only mortgage, your monthly payments only pay the interest on your loan. This means you’ll need to pay the balance of the loan at the end of the mortgage term as a lump sum. This is different from a traditional mortgage, where you pay both your interest and part of your mortgage debt every month. While payments might be smaller with an interest-only mortgage, they can be more expensive than other mortgage plans, because you pay interest on the whole amount for the life of the loan.
One of the most common ways to compare mortgages is through the Annual Percentage Rate of Charge (APRC), which shows you the total cost of your mortgage, not just the interest on an annual basis. These other costs can include fees from the bank, or from their surveyor.
Once you’ve decided on a mortgage you want to progress with, you’ll need help to make sure that there are no legal problems with the purchase. (You can do this yourself, but the consequences of missing an important detail may be enormous!)
You can hire a conveyancer, or a solicitor.
Once you’ve geared up with the right team, contracts and a good understanding of some of the key terms, it’s time to start house hunting!
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