If you are in the market for your first home, you are about to enter an exciting phase in your life. There is a lot said about the benefits of renting over buying. You can’t argue with the fact that one day the building will belong to you, though, and you will need to make no further payments on it. That is the most compelling reason for buying a house, in my opinion.
Now is a good time to buy. Back in 2009 as the world was facing a financial crisis, the housing market took a nosedive and it was clear that our great leaders must do something to stimulate it. They elected to keep interest rates low and introduced the Help To Buy scheme. Under it, people only need to save a five percent deposit for a mortgage and the country will pay the rest in the form of a loan. It is a roaring success; so much so that the market is racing and the government is considering measures to calm it down. Prices are going to continue rising, so bricks and mortar are a wise investment. Whether you are interested in 4-bedroom houses for sale or apartments, now is an ideal time to commit to a purchase. Here are some mortgage options open to first-time buyers.
Variable Rate Repayment Mortgages
With a repayment mortgage, you know where you stand. There are no bells and whistles to confuse you. It works like an ordinary loan, but the interest on it can go up and down. That will have an effect on your monthly repayments which will rise and fall with the interest rates. The banks perform stringent tests on your financial situation to see if you could cope with interest rate rises before they will advance the money for a mortgage. It was irresponsible lending and bad debt that caused the crisis, and we are picking up the pieces now.
Fixed Rate Repayment Mortgages
Many people opt for fixed-rate mortgages. You repay a fixed sum of money every month for the life of the mortgage and rate rises do not influence them. They are ideal for people who like to plan ahead and enjoy financial certainty, but they might cost more than a variable-rate loan in the long run.
An endowment mortgage uses a life insurance policy to pay off the capital upon maturity. When you take on this loan, you make monthly payments to cover the interest only. Back in the 1980s, they were sold to us with great promises of future wealth because when the time came to pay off the loan, there would be a lot left over to put into our pockets. What sounds too good to be true usually is, and that was the case with those mortgages. Many people found there was not enough to pay off the capital and had to take on another loan to make up the difference.
I am a firm believer in keeping things simple wherever possible. If I were about to take on a mortgage, it would be a variable-rate repayment option. You borrow the money and start repaying it; what could be more straightforward than that? As time passes, more and more of the building belongs to you, so you have some security. What do you think?