The pros and cons of getting a mortgage
Owning a home is something many people in the UK aspire to. However in order to purchase that new house, it’s necessary for most homebuyers to take out a mortgage. But a mortgage is usually a long-term commitment and an agreement that should only be entered into after much thought. We’ve put together some pros and cons to help you see if taking out a mortgage is for you.
Advantages of a mortgage
Cost-effective borrowing – Compared to other types of borrowing, mortgage interest rates are usually lower.
Tailored borrowing – You have a choice of mortgage types, such as fixed-rate, tracker, variable-rate or discount mortgages. It means you have more chance of finding the mortgage deal that’s exactly right for you.
Longer-term mortgages – Nowadays, you can access a longer-term, 30-year mortgage instead of the usual 25-year mortgage. This spreads the cost of a new house purchase over a longer time period and, in turn, means your monthly payments are generally less (although the total amount repayable over the full term will be more). With the average UK house price being around £300,000, that’s always welcome. While 30-year mortgages may mean a longer-term commitment, they can offer a more affordable option than was previously the case.
As an investment – Taking out a mortgage is, in most cases, cheaper than renting. In the possible scenario that your outgoings on a mortgage are comparable to renting an equivalent property, then paying towards a mortgage at least means you are putting money into something you should eventually own.
Disadvantages of a mortgage
Debt – By taking out a mortgage you’re taking on debt. You’re promising you’ll be able to pay back a significant amount of money within a certain time period. You’ll also be paying back quite a bit more than the initial amount.
Secured Loan – If you can’t keep up with the repayments, you could lose your home. The mortgage is secured against the property you’re buying.
Additional fees, charges and add-ons – Mortgage and valuation fees are just some of a number of extra costs you’ll have to budget for. These can add up to a significant amount of money.
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