A mortgage is a loan made by a mortgage lender to a property purchaser. A deposit is the complementary amount of cash put towards your first property. The property is paid for with a mortgage and usually a deposit too. Very few lenders do not require a deposit to be put down by the purchaser . Sometimes parents will help with the deposit. Yours may be able to help you, particularly if they are still working or have a very small mortgage in relation to the value of their property.
To find out which mortgage is right for you, you need to seek advice from a good mortgage broker or an independent financial advisor who specialises in mortgages. Some advisors charge for their services. The mortgages specialist will take into account what outgoings you have – including any outstanding loans or debts. The specialist will suggest to you or advise you on which might be the best option for you.
Essentially the differences between the mortgages from the different lenders are the terms on which you can borrow, the terms on which you pay the money back and how much they will charge you for the privilege of being granted the loan and any changes you make in the future. ‘An interest only mortgage’ is one where you have lower monthly payments but none of the actual loan is being paid off whereas a repayment mortgage means you are paying off the loan and the interest each month so you will own the property at the end of the repayment term.
You must never forget that if you and any co-owner defaults on the mortgage payments, then the mortgage company has a right to repossess that property.
It is possible to research the mortgage market yourself by comparing different mortgages from various lenders – but it is complicated. There are magazines that can help you with tables and recommendations. On the other hand, a broker or advisor – who may or may not charge for his services, can look at a whole market and compare products and help you decide. The way brokers and lenders give advice is carefully regulated by the Financial Services Authority and they will not give advice, only information, unless you specifically ask for it.
Contributed by Helen Adams, Managing Director of www.FirstRungNow.com
See Also: Help for First Time Buyers (6)