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Borrow for Mortgages
In general, home ownership has been rated as one of the safest investments in the long-term, although there are the occasional price falls that lead to negative equity and other problems. Even then, buying a home saves on rental payments and will almost certainly provide an appreciating asset over a number of years.
Unless you have access to large amounts of money or are moving down to a cheaper home, you'll need to arrange a mortgage to finance the purchase of a property. If you're a first time buyer, you'll almost certainly be in the market for a mortgage, while you may also be an existing borrower looking to switch lenders at the end of a deal.
The mortgage market has changed significantly but there is still enough choice around to make it worthwhile looking for the best deal. If you've got a bad credit rating, your options might be limited and you may need to look at specialist lenders and take what is available. But if your credit rating is good, you may have several options available.
Many people look for a fixed rate deal that offers a reduced rate for a set period. Once the offer ends, charges will normally change to the lender's standard variable rate. At this point, borrowers often seek out another fixed rate deal. However, all types of mortgage can involve set-up fees and early repayment charges, so it's best to check the overall cost before switching. Many people simply take out a variable rate mortgage where the rate changes in line with the base rate or other market conditions.
Most mortgages are repayment types, where each payment covers the accrued interest plus an amount towards the capital borrowed. The outstanding balance therefore reduces during the term of the mortgage and is completely cleared at the end.
The alternative is an interest-only mortgage where repayments are only enough to meet the interest charges. In this case, an additional repayment method is needed, typically an endowment policy that also provides life assurance cover, an ISA or payments into a pension fund. These plans are often tax efficient and may generate a cash surplus. The danger is that a shortfall may result if an investment doesn't perform as expected, requiring additional payments to be made.
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