If you are a first-time buyer, the financial obligation associated with purchasing a home may seem daunting. But with the right tools and knowledge, this journey can become an exciting experience of planning and anticipation of new beginnings. This article explores the different types of mortgages available to first-time buyers and the things you will need to consider before applying. Read on to find out more.
Types of mortgage
As a first time buyer, it is important to understand the basics of mortgages.
Fixed-rate mortgages are easy to understand and offer security at both ends. They come with an initial fixed interest rate that remains for a specific period. After that, the interest rate can increase or decrease, depending on the current market conditions. The advantage of a fixed-rate mortgage is that there are no surprises. However, the disadvantage is that if lower interest rates are available during your fixed-rate period, you may find yourself paying more than you would be on a different deal.
Variable-rate mortgages fluctuate according to current market conditions. The advantage of an adjustable-rate mortgage is that you can take advantage of a lower interest rate while you are paying off the mortgage. For example, if market interest rates fall after your initial fixed-rate period ends, you will automatically benefit from the lower interest rates during the remainder of your loan period. However, if there is an economic downturn and interest rates rise, you could find yourself paying larger monthly repayments.
Things to consider when preparing to apply
To prepare for your mortgage application, you need to consider the following:
Income and expenses
The most important requirement for a mortgage application is a steady income. This means you'll need to have a regular source of income from employment or your business/partnership. You should also ensure that you have money set aside in an emergency fund to cover any unexpected costs that may arise in the future.
Having a good credit history means you are an established borrower with a track record of repaying your obligations. Your credit history will be reviewed by the lender to assess your ability to repay. You should take steps to improve your current financial situation if you have any 'black marks' against your name in your credit report. This may mean establishing new facilities using other banking or lending institutions to prove that you can make repayments.
For more info on first home buyers financing, contact a home loan provider today.