Choosing an Affordable Mortgage

Choosing a mortgage that you can afford to repay may save you a great deal of stress in the years ahead. For many households, the monthly mortgage repayment constitutes a significant percentage of their outgoings. A large monthly repayment may soon become unmanageable without mortgage help if you suffer a loss of income or take on new financial commitments. Over the course of a loan that may last more than 20 years, it is not impossible that you or your partner will be temporarily unemployed, or that you will decide to buy a new car or have a child.

Predicting the future is impossible, but most home buyers have a general idea of where their careers and family lives may take them. By choosing an affordable mortgage, you'll be prepared for the eventualities that may affect your finances in the years to come. To find a mortgage you can afford, spend time comparing offers from several of the leading banks, building societies or specialist lenders in your community. Because the costs of a mortgage vary between lenders, it's worth the time and effort to shop around.

Using a Mortgage Calculator

Many financial institutions offer online mortgage calculators, which can help you to estimate your monthly repayments to determine how much you can afford to borrow. Although these simple tools are free of charge, calculators can save you money on the cost of your mortgage loan. By adjusting the variables on a mortgage calculator, you can determine how a certain interest rate, home deposit, property value or repayment term will affect your outgoings.

Once you've entered the requested variables in a mortgage calculator, the sum will reflect your monthly repayments. If the monthly repayment would tax your current budget, the property may not be affordable, or the interest rate may be too high. You may lower your monthly repayment by making a larger home deposit, searching for a lower interest rate or a longer repayment term. Bear in mind that if you extend the repayment term, you will pay more interest on the loan by the end of the contract, even if your monthly payments are lower.

Finding a cheap interest rate is one of the most important steps when you're choosing a mortgage. When you compare interest rates, look for a lender that offers a competitive, reliable Standard Variable Rate, or SVR. Most residential mortgages are variable loans, and the lender's SVR will play an important role in the overall cost of your home. Over time, the interest you pay for your loan will add up to a large portion of the cost of your mortgage.

Comparing Mortgage Fees

There are a number of administrative fees associated with a mortgage, and the cost of these fees can mount up to a large sum by the time you've signed the contract. Most lenders charge an arrangement fee, also known as a set-up or booking fee, which will vary from one financial institution to the next. Some institutions charge a completion fee rather than a set-up fee, and the completion fee is due when you take possession of your new property.

Your lender may charge a property valuation fee to determine the value of the house before you buy the residence. If you arrange the loan through a broker, a broker's fee will apply. You may be required to pay a Stamp Duty Land Tax if your property exceeds a certain value. Altogether, these fees and charges can add to the overall cost of your mortgage. Choosing an affordable mortgage requires a consideration of legal fees and administrative costs as well as a thorough comparison of interest rates and repayment terms.