Making Mortgages Easy to Understand

Henry Richards By Henry Richards, 25th Jan 2013 | Follow this author | RSS Feed | Short URL http://nut.bz/1x58-b27/
Posted in Wikinut>Money>Mortgages

Recent reports indicate that the property market in Ireland is starting to recover. If you want to buy your own home but aren’t sure where to start then this ‘jargon buster’ might help you make sense of the mortgage maze.

Introduction

Buying your own home is an exciting time but also one of the most stressful events that you can experience in life - and the stress can start before you’ve even got the keys to your new home. Before you start looking in estate agent windows and picking out sofas take a few minutes to think about what mortgage is best for you.

With a huge range of available mortgage products, many with their own unique features, even trying to decide which type of mortgage to apply for can be daunting. Here are some of the most common mortgage ‘jargon’ words explained:

APR

This stands for Annual Percentage Rate. Lenders are required to advertise this to show how much your mortgage loan will actually cost, including interest charges and any bank fees. Your mortgage loan is made up of the capital part; the initial amount of loan you borrow, and any lender fees. Interest is charged on this amount over the number of years of the mortgage.

By comparing the APR offered by various lenders you’ll be able to shop around for the best deals. You’ll usually get a better deal, the larger the amount of deposit you can afford to put down i.e. amount provided by you towards the purchase price. Most mortgages will require you to put down a minimum of 10 per cent as 100 per cent mortgages are no longer freely available.

Affordability

Not as simple as it first sounds as this is subject to the lenders own criteria. As a borrower, we think we know how much we can spend on our mortgage every month. However, all lenders will require you to provide a full breakdown of your monthly income and outgoings to allow them to assess if you can actually sensibly manage to make the monthly repayments. Always find out how much you can afford to borrow before you start house hunting.

Most mortgage providers will have an easy to use online mortgage calculator which will let you see exactly how much the monthly repayment would be. You can calculate this for different mortgage types, loan amounts and varying mortgage terms. The term of the mortgage is the number of years you want your loan to last, commonly 25 years.

Early Repayment Charge/Penalty

Depending on the type of mortgage you choose you might have to pay a charge if you repay the mortgage before a certain time. These usually apply during the first few years if you’re on a specific mortgage deal. For example, lenders may offer mortgage deals with a lower interest rate for the first three years. So although a deal may look attractive on paper take time to ask your lender for details about these possible penalties if you need to repay the loan within the set deal period e.g. if you had to sell your home to relocate for work. These penalties can be high, especially during the initial mortgage years.

Stamp Duty

This is a government tax you’ll have to pay on completion of the purchase of your property. For the Republic of Ireland you can find details on the Revenue of Irish Tax and Customs website. For the UK you can find details on the HMRC website. Your solicitor will also be able to advise you.

It’s a certain percentage of the property purchase price and you’ll usually be expected to fund this yourself. Make sure you factor that into the costs involved alongside any deposit you need to pay and solicitor fees. Your solicitor will handle the practical aspects of paying the stamp duty.

Conclusion

Finally, don’t be afraid to ask your lender to explain anything you’re not sure about before you sign on the dotted line. A mortgage is likely to be one of the biggest financial outlays you’ll ever make and a good mortgage lender will be happy to discuss any questions. Many will have their own explanatory booklets and it’s worth taking some time to read these and the small print on your loan agreement.

With house prices set to rise over the next few years is now the time to snap up a bargain and become a homeowner?

Tags

Affordability, Apr, Buying A House, Early Repayment Charge, Guide, Mortgage Jargon, Mortgage Terminology, Mortgates, Stamp Duty

Meet the author

author avatar Henry Richards
This blog is run by a bunch of people working for a digital agency.

Share this page

moderator johnnydod moderated this page.
If you have any complaints about this content, please let us know

Comments

Add a comment
Username
Can't login?
Password