Are you thinking about taking your first step onto the properly ladder? If you are, then I’m sure you’ve been researching all you need to know about mortgages. I was recently looking for houses for sale in Midlothian and I thought it would be a good idea to do a basic mortgage guide so here we go…

Put simply, a mortgage is a secured loan that you take out and it’s secured against the home that you buy, but it’s not just that simple. There are so many mortgage products on the market that you need to know what suits you and your needs.

The Property

First things first, you need to identify the property you want to live in. This can be incredibly difficult and the way house prices change can have a big bearing on your decision. Once you’ve decided on the property it’s time to think about borrowing.

Borrowing the money

How much your borrow for your home depends on how much you want to spend, your own personal circumstances, your income and your expenditure, there are lots to take into account.

Most mortgage providers offer deals at around 75% loan to value, which basically means that you will have to pay a deposit for the property for the remaining 25%. In years gone by you used to be able to get a 100% mortgage!

A good way to see how much you will have to repay is by using a mortgage calculator, there are loads of free tools like this available on the web and they can be a big help. Now you know how much you want to borrow, you need to know what type of mortgage you want.

Types of Mortgages

• Fixed Rate – These mortgages are set at a certain rate for a set period of time, so if the base rate rises your mortgage rate doesn’t.
• Variable Rate (sometimes referred to as tracker) – The rate here is set normally above the base rate and your payments will increase or decrease in tandem with the base rate. For example, when the base rate is 1% and your tracker mortgage is at 2.5% you will be paying back 3.5% interest.

Once you’ve decided on a type it’s time to work out your repayment strategy.

Repayment time

There are two types of mortgage repayment strategies, capital or interest only.

• Capital – This strategy means that your monthly repayments are split between your loan and the interest incurred. Your payments may be quite high but when you’ve finished your mortgage you will have re-paid your debt and your home off in full.
• Interest only – This means that you only pay for the interest charged and not the original value of the loan.