Home loan and mortgage brokers, uncovered.

Home loan and mortgage brokers, uncovered. For most of us the world of home loan and mortgages is bizarre, complicated, hard to understand. You and I will probably only need a home loan or mortgage once or twice so we might think it’s not worth investing too much time in understanding it, better to leave it to the professionals. That is exactly what the ‘professional’ want you to think. Before I say anything else, let me clarify I am not criticizing going to financial advisers and loan brokers to get your mortgage, on the contrary, it’s the best thing you can do. What I am saying is that you shouldn’t put blind trust in anyone when making some of the most important financial decisions you will make. You need to be an informed customer, that calls his own shots and uses the skills of experts to his own advantage, not the other way round.

So what do you need to know about home loans and mortgages? You need to know the risk behind them. You need to know what the basic concepts of a loan are, like interest rates, tenure and the main mortgage formats and what they mean to you.

What is the risk? The worst case scenario is that you end up homeless and hopelessly in debt. That is a pretty scary worst case scenario you need to make sure you keep away from. Will you trust blindly in someone when you risk losing everything.

The basics. You need to do plenty of research before you sign the dotted line but here are the basic things you need to know.

1) Read the entire contract and make sure you understand everything.

2) Decide what is best for you, fixed rates, variable or A.R.M. Fixed interest rates do not change throughout the entire term of the loan or mortgage regardless of how the going interest changes, this is a good solution for those who have a fixed income and like to budget for the long term. It is also a good option if you are planning to keep the property for a long time, especially if you plan to buy to let. Variable interest can be the cheapest as you only pay the going rate with no extras, like with fixed rates type, however your monthly payments could rise considerably if the interest rates climb. Adjusted Rate mortgage is the hybrid solution, it is fixed for part of the term of the loan and then becomes variable. This is a great choice if you plan to sell in a certain amount of years. Why pay for a fixed rate of 10 years (the longer the term of the fixed rate the more interest you pay) when you won’t own it in x amount of years. For peace of mind you can have a fixed payment and then sell the property.

None of these suggestions will get you a job in the Treasury department, they are basic guidelines. But if you work with them and do more research you can save a fortune on your mortgage.