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How To Find The Best Mortgage For You
There’s no such thing as a one-size-fits-all mortgage. To get something that really suits you, you need to consider your individual needs and priorities. Mortgages come in all shapes, sizes and price tags, too. Our guide explains the basics to help you find the perfect fit.
How Will You Be Paying For Your Mortgage?
You’re borrowing money to buy a home, you need to decide how you’re going to pay the money back:
Repayment
Interest-only
Combination of the two
What Is A Repayment Mortgage?
With a repayment mortgage (also known as a capital-and-interest mortgage), the payment you make to your lender every month pays off some of the capital you’ve borrowed as well as the interest owing. So each month you pay off a small part of your mortgage. It is the only 100 per cent guaranteed way to clear the debt by the end of the mortgage term.
On the downside, in the early years, your payments will be mainly interest so if you want to repay the mortgage or move house, you’ll find the amount you owe won’t have gone down much.
What Is An Interest-Only Mortgage?
With an interest-only mortgage you pay (yes, you guessed it) the interest only charged on your loan every month. You don’t reduce the loan itself. This makes the monthly payments lower than with a repayment mortgage which is why this type of mortgage is attractive to borrowers starting out on a tight budget.
But it’s very important to arrange some other way of repaying the loan at the end of the term. Most people make a monthly payment into an investment or savings plan, or convert the mortgage to a repayment plan later.
Conventional, Offset Or Current Account Mortgage? Offset mortgages offer a more flexible way of repaying your home loan than conventional mortgages as they link your credit (savings, current account) with your debt (mortgage). For some, they can be a more cost-effective type way of managing the finances. Read The Lowdown on Offset Mortgages to find out more.
