What you need to consider when getting a Home Loan

There are many considerations that should be made when it comes to getting a home loan, so you will want to learn all you can before even filling out an application. If you want to get one of these loans in the near future, you will have to educate yourself. Too many people rush into getting a home loan, and they usually regret it later on. In the end you will be very glad that you took the time to do this research because of how it will benefit you overall.

Take a look at your credit score

First off, you will need to find out what your credit score is. The fact is that your credit is going to play a major role in getting a mortgage, so you will definitely need to make a point of finding out your score. Take a close look at your credit report and look for any mistakes or errors. You could potentially improve your score if you see any items on there that shouldn’t be. When you know your credit score, you will be able to manage your expectations a lot better.

Do the math

You should also sit down and do the math so you can figure out exactly how much you can afford to pay on a mortgage each month. The last thing you want is to take out a mortgage you cannot afford, because doing so would be disastrous. Make sure that you factor in all of your static expenses (utilities, internet, car payments, etc.) Once you have done this, it will be a lot easier for you to know what you can afford.

Decide on a certain type of mortgage

Despite what some people seem to believe, there is more than just one type of mortgage. Take the time to look into your home loan options so that you can pick the right one to match your needs. You should have a good understanding of what a hybrid mortgage is before you make a final decision. It’s also important that you know the difference between a 30-year fixed rate mortgage and an interest-only mortgage. While a longer term may seem better because you’ll have longer to pay it off, you’ll also end up spending more on interest over the years.

Special loan programs

One thing that you will definitely want to do when it comes to getting a home loan is to find out if you qualify for a FHA loan or VA loan. These are government programs that can minimize risk for lenders, which in turn will provide you with opportunities you wouldn’t otherwise have. If you are a former member of the military, there is a good chance that you could qualify for one of these loans. If you want to save as much money as possible on your mortgage, it is crucial that you spend some time looking into these options.

Finding the right Lender

It is of course important that you find the right lender, as there are many different ones that you can borrow from. The more time you spend looking into your lender options, the better of a deal you are likely to get. Make sure that you ask each of the lenders you come across certain questions that will help you to know them better. You should also discuss your specific borrowing needs with each lender. Take the time to compare home loans online apples to apples so you can get the very best rate.

Final Thoughts

Anyone who is interested in getting a home loan will absolutely need to do the necessary research beforehand. When you actually take the time to consider all of these things, you will be able to get the loan you need without any issues at all. Making even a seemingly simple mistake when it comes to getting a home loan can mean serious consequences later on. A home loan is a very big deal, so you will therefore need to do everything in your power to make sure everything goes smoothly. You also might want to consider hiring a broker to help you find the best mortgage deal.

Should I be Scared of Interest Rate Changes?

It can be very easy to worry when the Bank of England changes the base rate. This is because rates have stayed consistent for a long time and when it changes it can be a worry to think about what the consequences might be. The media report on it as well and come up with the worst case scenarios of how it might lead to big problems and this can lead to panic. Most rate changes are not huge and may not even have an effect on some people. It is therefore advisable to be sensible and think about how it might affect you personally rather than worrying about which the press are saying.

It is worth starting by looking at what you are currently paying for any debts that you have, including loans and mortgage and what interest you are receiving on any savings that you have. You can calculate the interest simply by multiplying the interest rate by the amount of money that you owe or hold and then divide by 12 to find out the monthly figure. If you have a mortgage, for example, do this for the current rate that you are paying and then calculate it for what you think the new rate will be and see what difference it makes. You may find that the difference is not going to make a huge impact on you anyway. You may not even find that the rates you are paying or receiving change anyway as even when the base rate changes, financial institutions do not always change their rates, unless you have a tracker account.

Years ago rates tended to change a lot going up and down every few months and this meant that no one really worried too much as they were used to coping with it. Now that rates have been low for so long it is a big deal when they do change and this is therefore why people get more concerned. It is wise to be prepared though so that when rate changes happen you have no need to panic.

If you have debt then you will most likely have to pay back more each month in interest payments if the base rate goes up. Lenders tend to increase their rates very quickly when the Bank of England increases their rate and this means that you will need to be prepared for this. However, if you fix your rate it will protect you from this. It can also be wise to hunt around for better rates and make sure that you are paying the lowest possible amount so that you are not paying more than necessary. When you are borrowing money make sure you think about how you will cope with the repayments if the rates do go up by ensuring that you do not borrow so much that you will struggle if rates go up. Obviously if rates fall this could be great news for you but unfortunately lenders tend to be quick to put up rates when they rise but do not lower them so quickly when they fall. So unless you have tracker, which has to track the base rate, you may not see your rate lower.

If you have savings then an interest rate change could also affect you. Although rates on mortgages tend to be most closely effected by base rate changes, savings accounts could also change as well. It can be a worry if the rates keep falling and you are not seeing a good return on your savings, particularly if you are hoping that you can use the interest as part of your income. However, many people have moved savings into investment accounts lately because of this. If you money is invested them a rate change will not have a direct impact on it, although a knock on effect could change the stock market which is more likely to influence your return. With savings accounts it is likely that if interest rates fall, the rates will also fall but if they go up the rates may not go up. It is wise to keep a check on which savings accounts are offering the best rates and taking advantage of these, moving your money regularly to make sure that you are getting the best return that you can.

How Do I Find the Best Loan Rate?

Borrowing money is a big decision. Many people take out a loan via companies like Emu.co.uk perhaps just using their own bank or one that they see advertised, without thinking much about whether it is the best loan rate. It is really wise though to do your research first. Loan rates can vary a lot and you should be checking carefully before taking out a loan to make sure that you find the best possible ones.

There are many places and ways to do your research on this. Some people choose to pay a financial advisor to help them. Although they do have a great knowledge and will be able to show you the cheapest rates, you do have to pay them and this could put a lot of people off. If you are borrowing a significant amount of money, their fee may be offset by the savings that you could potentially make but usually this would not be the case and you would be better off doing the research for yourself. It is fairly easy these days to get a good idea of the best rates.

Comparison websites are a place that many people will look. These compare a number of lenders and will list them in order of rates with the best rates at the top so that it is really easy to see which to go with. It is wise to be cautious though as they do not tell the full story. These sites will not compare every single lender, many choosing to just list those which give them the highest amount of commission. There are some websites which do look at all lenders though and you should take a look for those.

You may wonder whether it really makes a big difference to worry about finding the best rates. However, if you do the maths and compare the amount of money you will be repaying in interest between the different rates, you will see that it can make a huge difference. The more money you are borrowing and the longer the term; the bigger the difference it will make. It is worth thinking about whether you want to tie yourself in to a fixed rate so that you know how much you will pay each month and avoid the impact of any rise in interest rates or go on a flexible variable rate so that you can change lenders if you find a better rate and your rate may go down if interest rates go down.

It is worth noting that not all applicants will get the advertised rate on a loan. This means that you will need to make sure that you check this before you make a firm decision as to who to go with. Lenders will look at your credit record and if they feel that you are a risk, they will not give you such a good rate on your loan. Therefore, if you pick what you think is the best rate, you could find that in fact it is not the best rate once you speak to the lender about it. However, as all lenders look at your credit rating they may all change the rates they offer compared with their advertised rates, but they may not all do it in the same way. Therefore, if some offer very close rates then it can be worth speaking to them all in order to find out which will give you the best rate.

There are other factors as well as rates that some people consider when they are taking out a loan and it is good to be aware of these as well. Firstly there are other costs as well as interest to consider. You may feel that interest is more important, but while interest rates are low, other costs can also make a significant difference to the total cost of the loan. These can include any fees for opening the account, perhaps administration fees, early redemption fees, for paying the loan off early and charges for missing a repayment or making a late payment. It is worth finding out about all of these types of fees for any of the loans that you are interested in so that you are aware of the charges and you can allow for them when you are calculating which you will find the cheapest.