When people purchase a home, the biggest continuing cost is a mortgage. A mortgage is a loan that is secured against a home or a property. If you fail to keep repaying your loan, the lender can repossess your home. Agreeing to a mortgage, then, is not a low stakes purchase. And as you will have seen on the news, the last few years has seen a lot of people who took out mortgages and couldn’t pay them back.

Because of this pressure, looking for a mortgage can be an intimidating process.

To find a mortgage, get a basic idea of what is available on the market. To do this, contact a reputable, legitimate estate agent who will be able to explain the basics and tendencies of the mortgage market to you. An estate agent is a professional who will help you find a mortgage, as well sell or lease a home to you.

If you have a relationship with a bank or a building society, contact them to see what their mortgage options are. Another place to look for mortgage options is directly through a home builder or developer, many of whom offer competitive mortgage options. Lastly, your employer might offer packages or deals for employees looking to purchase a mortgage.

mortgageNow that you know where to look for a mortgage, it is important to know how to pay one back. In today’s market there are two main types of mortgage repayment options. They are:

Repayment Mortgage

A repayment mortgage allows you to make monthly payments on your mortgage, paying down the interest of the loan, as well as the mortgage itself, until it is paid off. These can come in many shapes and guises, e.g. variable tracker rate, fixed rate, low deposit, etc.

Interest Only Mortgage

Not as accessible as they once were, an interest only mortgage allows you to make monthly repayments on your mortgage that covers only the interest on the loan. However, be aware that you still need to pay the mortgage off at some stage in the future.

If you are unsure what type of mortgage, then use a mortgage calculator like the one on the Clydesdale Bank website to work out what it would cost and how affordable it would therefore be.

There are several types of mortgages available for purchase, each of which include the two aforementioned repayment options and each with their own benefits and drawbacks:

Flexible Mortgage

A flexible mortgage allows you to change your monthly payments, making it possible to pay the loan off more quickly.

Offset Mortgage

An offset mortgage is a mortgage where the lender links the mortgage to one of your accounts (either savings or checking), and then makes monthly payment adjustments on the loan depending on how much you have in your account, versus the interest rate of the loan.

Current Account Mortgage

Lastly, a current account mortgage is when the lender links all of your banking accounts together, and makes monthly payments on your mortgage.

Now that you have identified potential places to purchase a mortgage, are aware of the repayment plans, and have a working knowledge of the various mortgage types, there are many things to think about before buying a mortgage. Most importantly, to purchase a mortgage, you must have a good credit rating. That is, the better your credit rating, and the bigger the deposit you can make, the better your options are for purchasing a mortgage.

There are additional costs when purchasing a mortgage, too, all of which need to be considered. Not only will you be purchasing a mortgage, but you will also be buying a property. Fees, payments, and property taxes are not cheap, so be sure to include these in your budget when making plans to buy a mortgage. If you find that you cannot comfortably make your mortgage payment without going over budget, wait a few years, grow your savings, and try to make the purchase again.

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