What are my best options when working out a payment plan for my home mortgage?
Andrea - do you mean a plan for the eventual repayment of your mortgage, or how to meet your monthly mortgage payments? And is your mortgage a 'repayment' (ie, you are paying some of the mortgage loan off each month, in addition to the interest) or is it an 'interest-only' loan? | 12.22.10 @ 18:23
I am a first time buyer so I am not sure what is the best way to go. | 12.22.10 @ 20:22
There are two aspects to this question: the lender's point of view, and your point of view. Let's think about the lender first.
Lenders work out how much they are prepared to offer according to your income and fixed outgoings, including any loans or credit cards. This, and other information they will ask will give an idea of how much they are prepared to lend you, bearing in mind that they will need a good deposit, and the property must be within their lending criteria. Once you have a picture of the size of the loan you can work out how much it will cost on a repayment basis (where the loan will be paid off after a number of years) or on an interest-only basis (where you are only paying the interest, so the loan does not reduce as time passes).
You next need to work out your personal budget, and for that it would be a good idea to talk to parents or friends, particularly if they own or rent a property similar to the one you intend to buy. They will give you a good idea of the various expenses you will meet, such as heating, lighting, insurance, maintenance and so on. Once you have prepared your budget as fully as you can you should have a good idea about how to proceed.
Remember, though, that everything always costs more than you expect, so do build in a good safety margin as well as some ongoing savings to cushion you against unexpected costs.
Owning and running your own home is enjoyable and easy, as long as you are sensible and controlled, and don't over-extend yourself. For some calculators to help you with budgeting and for calculating mortgage costs, have a look at this useful website which is run by the Financial Services authority, and also check out some of the 'Helpful Stuff' on the SimplyFinance website:
http://www.moneymadeclear.org.uk/hubs/home_everyday.html | 12.22.10 @ 20:56