A mortgage is probably the most important financial product you will ever get. It will most likely be the most money you ever borrow and most people spend at least 20-30 years paying on their mortgage. It is important you make the right choice when you are determining the right type of mortgage for your situation.
In these current times, getting a mortgage can be quite difficult. It can be hard to tell sometimes between a good deal and a not so good deal so make sure that you keep checking back to Santander’s mortgage payment calculator to help you decide what is best for your situation.
There are different types of mortgages available today. The two types of mortgages we are going to focus in this article are interest only mortgages and a typical principle and interest mortgage. An interest only mortgage is one where you only pay the interest (as you’d expect) but at the end of the period, you haven’t paid off any of the original loan. Even after years of making payments, with an interest only loan you don’t own any more of your house than you did to begin with. A principle & interest repayment mortgage pays off the interest and the loan balance together and at the end of the loan, you own your house entirely.
Standard advice suggests that your mortgage should be a principle & interest repayment mortgage so you can own more of your house. Getting into an interest only mortgage can cause problems for you since you are not paying any principle on the loan. At the end of an interest only mortgage you have to either pay off the remaining capital at once (which is extremely unlikely) or get another mortgage. You could have made mortgage payments for 25 years and not have anything to show for it!
Interest only loans are like a halfway house between owning and renting a property. If an interest only mortgage is the only way you can get on the market, you should probably reconsider buying a home entirely. If you can’t afford principle and interest payments, you are better off waiting until you have the money or you should consider buying a lower priced home so your budget can handle the principle & interest payments.
Because mortgages are such a big deal, it’s always worth getting independent financial advice before going ahead. If you are really unsure of what to do, it may be worth it for you in the long run.