08:33 18 July 2013
You should compare interest rates before you decide on taking on a mortgage. Price competition between building societies has been brought to a new level as Leeds Building Society introduced their zero per cent mortgage deal. Schemes such as interest-free packages have been used by the credit card industry for the longest time. Realizing the pulling potential of this type of offering for mortgages, it may just be a matter of time before the entire mortgage industry joins the bandwagon.
What the borrower should understand however, is that even if the mortgage starts low initially, they will probably have to contend with paying higher rates for the balance of the term.
Buying a home, especially for the first time, can be quite daunting. A lot of decisions have to be made, most of them major. You have a dream house in mind located in a most desirable and accessible neighbourhood. However, meeting this dream will be dependent upon how much credit approval you can muster from the building societies. Your approved credit will certainly define the limits of the kind of house you can purchase, unless you have some savings to augment the budget.
You have to consider the type of interest rate that would be applied to the loan. Will a fixed interest rate be more advantageous than a floating rate loan? The type of interest rate that you choose is critical. No matter how convincing the first offer looks like, do not decide as of yet until you have looked around and compared the offers of the other reputable mortgage companies.
It could be more appropriate for first time home buyers to take on fixed rate so that your EMI payments will remain the same regardless of surge in interest rates.
Endeavour to calculate the total payments that will be made up to the end of the mortgage loan term. You should be fully aware of the penalty that will be charged for prepayment as well as for late payments which are usually computed based on a compounded interest.
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