A repayment loan is cheaper in the long run as you repay the
sum borrowed – the capital – as you go along, reducing
your interest bill and leaving you debt-free at the end of the
mortgage
term.
But an interest-only loan – where you don’t
clear the capital portion of the debt until the end –
is cheaper in the short term.
So if you have a deposit,
but can’t afford large monthly payments, an interest-only
mortgage might offer a temporary solution.
We say temporary because once your financial situation eases,
you should switch to a repayment mortgage to reduce your long-term
costs.
For a full explanation of the pros and cons of these mortgages,
read…
In the not too distant past, most mortgage lenders wouldn’t
give you more than three or three-and-a-half times your salary.
But now – provided they consider you a good
risk – many will lend four times your income, and some
will go as high as five or six times.
Borrowing this much is risky though – ask yourself, for
instance, how you would cope with the repayments if you lost
your job or became unable to work.
And what if you needed to sell at a time when property prices
were falling?
You could be left with a debt bigger than the value of your
house.
Choosing a mortgage with a fixed
rate of interest, rather than one that varies, will give you
certainty about your monthly costs, making it easier to budget.
Several lenders offer mortgage deals specifically designed for
first-time buyers.
It’s always worth considering these, but there’s
no guarantee they will be cheaper than a host of other deals
open to all types of borrowers.
That’s why it’s vital to enlist the help of an independent
mortgage adviser to check the entire market on your behalf.
And before making your choice, be sure to consider all the costs
– including the interest rate, fees and possible penalties
– and all the terms and conditions.
Want
to talk
with a mortgage adviser who specialises in helping First Time
Buyers?
We can put you in contact with a professional mortgage adviser
who will find
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And there’s more – plenty more
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