A solicitor will keep you informed throughout the process and will notify you when you are required to sign documentation to avoid delays to your move. Paperwork delays are a common problem in house moving chains and an effective property lawyer will help avoid hold-ups.
There are two major decisions you will need to make when selecting a mortgage plan: Will you have an interest-only or repayment mortgage, and will you have a fixed or adjustable rate mortgage.
In this guide we'll outline the advantages and disadvantages of each plan. You then should be able to make the right decision, based on your current situation.
The best thing you can do at this point is to read about all of the mortgage plans out there, and become aware the opportunities that are available. Once you are aware of what is out there, shop for different plans via mortgage comparison websites (we've listed our favourites below), and when you are ready to move forward, contact a mortgage advisor for a free consultation (also provided below!).
The majority of homeowners acquire a repayment mortgage. A repayment mortgage plan pays back the interest as well as the initial capital you borrowed for the purchase every month.
An interest-only plan pays back just the interest each month, and then pays the capital lump sum at the maturity date of the loan.
Most borrowers should avoid interest-only mortgages. This is because generally homeowners do not have enough savings to pay off the lump sum at the end. But if you are confident with your savings account, then you should speak with a mortgage advisor because this option could be in your best interest (no pun intended!).
Fixed rate mortgages are pretty self-explanatory as the interest you pay does indeed stay at the same rate for the duration of the loan. Fixed plans in the UK are typically only 2 – 5 years, then one is switched over to an adjustable rate mortgage plan after that fixed plan matures.
The interest rate of Adjustable Rate Mortgages (ARM) fluctuates, and in general, they trend along with the interest rate determined by the Bank of England.
Interest rates have been historically low for a few years due to the banking crisis (and now Brexit). This greatly rewarded those with adjustable rate mortgages because their interest rate synchronizes with the Bank of England base rate.
If you are purchasing your first mortgage plan, it would be in your best interest to speak with a mortgage consultant about the fixed rate mortgage plans that are available to you.
Interest rates are not likely to go down much further from 0.5%, therefore, you can expect the adjustable rate mortgage plans to only increase their monthly payments in the near future. However, you should still shop around all types of mortgage plans as they are competing for your business.
With that being said, here are the advantages and disadvantages of each plan.
Standard Variable Rate:
If you have some questions about which type of mortgage is right for you, we'd suggest talking to a mortgage broker.
Which? Mortgage Brokers are impartial as they don't work on commission. They can answer your questions if you're a first time buyer, refinancing, buying-to-let or moving homes.
Get your free initial consultation.