Cheap home loans, cheap rates, possible?

Cheap home loans, cheap interest rates, possible? Cheap home loans, cheap interest rates. You have probably seen those words together hundreds of times in every website with Google ad words. Did you ever think they exist? Well depending on what you consider cheap, they most certainly do. However you must have the right circumstances, make the right choices, and understand what cheap home loans really means.

With the current financial situation, governments bending backwards to drop interest rates, if you have a good credit score and can afford high monthly payments, you can most certainly get a great deal. Be smart go to a reputable mortgage broker or specialized bank / lending company and you will be surprised of how cheap your new home could be.

But what does a cheap home loan or mortgage really mean.

A cheap home loan, is not necessarily a loan or mortgage that has low monthly payments. Low monthly payments is the number one trick up the sleeve of disreputable mortgage and home loans brokers. Why do I say this? Take this example; you buy a house worth 200,000 pounds. The interest is 10% in both cases. In one case your broker recommends a 20 year loan that will make your monthly payments 1,930.04 pounds over 20 years which means you pay 263,209.59 pounds interest. However if you don’t look closely you might miss the same deal with a shorter tenure of 10 years of 2,643 10 pounds a month, with which you will pay 117,161.20 pounds in interest. This example illustrates that by increasing your home loan or mortgage by only 610 pounds you pay one and half times less interest and pay it in half the time.

Tenure, or the length of the mortgage is a key factor many people simply ignore in favor of cheaper monthly payments. But as we have seen a cheaper monthly payment does not always equate to a cheaper mortgage. However you might say, that’s all very good but I can’t afford 600 pounds more a month, so it’s immaterial to me if its a better deal or not.

This is true, but the principle holds, if you can’t afford a 10 year mortgage, go for a 15 year mortgage that would have cost you 2,149.21 pounds a month but stil saved you over 85,000 pounds in the long run. The lesson the take home here is to see the big picture, what the loan or mortgage is REALLY going to cost you.
A simple way of calculating your monthly payments and the interest you will pay is to use monthly payment mortgage calculator. They are very useful as calculating the monthly payment of a mortgage is surprisingly difficult. Just type monthly payment mortgage calculator in your favorite search engine and make your first step to cheaper mortgages by simply being smart and understanding the simple principles behind a good mortgage;  A) short tenure and b) low interest. Try to keep those two factors as low as you can when shopping for your next mortgage or home loan and you will see the difference in your bank balance.