So you’ve finally decided to purchase your very first home. This is often an exciting – and nerve wracking – milestone because aside from the home itself, you need to decide on a proper mortgage deal. There are just so many out there that it can be overwhelming, with most simply looking to strike a deal with the lowest rates. Unfortunately, purchasing a mortgage for a first time home isn’t that simple, and it could lead to regrets down the line. So, what is the best mortgage for a first time buyer?
While there is no one size that fits all, there are a few things to keep in mind while applying for your first mortgage. Below are a few easy mortgage tips for first time buyers to take to heart when you’re looking for the right kind of mortgage for your first home!
Taking risks isn’t necessarily a bad idea
Many first-time buyers decide on a mortgage plan with a five year fixed rate; and for very good reason. Normally these rates aren’t affected by the fluctuations in the marketplace, which means the interest rate will be low-risk in comparison to shorter timetables. However, while this is definitely the smart choice for those who don’t want to take any risks, there is a chance to save on money by going for variable rates.
For example, if you’re confident with the stability of your earnings and your ability to save each month, shorter fixed rates and even variable rates can help save you a tidy sum. While the risk is generally higher with the possibility of a spike in price (however unlikely), the chances of earning more than a five year fixed rate is quite high.
Tips for those who decide on shorter timetables
For those who want to take a bit of a chance with variable rates, you’ll have to make sure that the one you choose keeps the overall payment the same even if the interest might fluctuate. Another great tip would be to make use of hybrid rates – which is about a half fixed and half variable rate. That way, you’ll be able to take full advantage of a low cost environment while still protecting your income from the possibility of high rates.
Considering portability in your mortgage
When you consider the fact that this will be your very first home, do you see yourself living in it for the next five or seven years? Perhaps the next decade? If this is the case, then portability in your mortgage isn’t necessarily something that can make or break a deal. Otherwise, you’ll need to look into acquiring a mortgage with portability features such as a sixty day minimum to close your new mortgage after the older home is sold.
Not going to move anytime soon? Consider a no-frills mortgage deal
This basically means that your mortgage will be a little less expensive overall in return for higher penalties if you choose to move or switch mortgages. It’s a great way to save money because most first-time-buyers tend to stay in their first home for a very long time. Consider this option if you feel like you’re not going to need to move for at least seven years.
To conclude, it might take some effort to try to figure out exactly what you want out of your mortgage. However, with these tips you’ll be able to stay ahead of the curve, and ensure that your very first home has a reasonable mortgage that will help you save on some extra cash as time goes on.