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Once you have decided to buy your first house your goal is not only to find the best rates but also to find the best mortgage to suit your circumstances and plans for the future. It is a good idea to sit down and write out your plans especially if you are planning to buy the house with a friend or partner. Are you going to buy a small flat to get on the housing ladder with the intention of trading up to a larger house later or can you afford to buy a large house now? Do you intend to both work full time for the length of the mortgage or do you intend to have a career break and go back to college or perhaps you plan to have children in a few years time? A mortgage is a long-term commitment so some initial planning could save you time and money. When you have your plans on paper calculate how much of your savings you will have towards the deposit. Don't forget to put aside money for the other costs in buying your home such as solicitor's fees and stamp duty and work out how much you will need for furniture and fittings. Finally write down your salary and any other sources of income, as this will influence how much you will be able to borrow. Traditionally most lenders would allow you to borrow up to three times your salary plus the salary of a second purchaser but with todays low interest rates and high house prices a few lenders have raised their limit to five times the first salary. If you are planning to take advantage of these loans make sure you are able to cover the payments if the interest rates go up. Now that you know roughly how much you can afford is the time to start searching for the right type of mortgage for you. Your individual circumstances will dictate the type of mortgage you should have. There are two main types of mortgage a capital repayment and interest mortgage and an interest only mortgage. A capital repayment mortgage is where the interest and the capital are calculated upfront and paid in equal instalments throughout the term of the loan. This type of loan is best for someone who is planning to stay in the house for a number of years this is because in the first few years most of the repayment goes towards paying the interest and only a tiny amount comes off the capital sum. So if you move after a few years you will find that very little has been paid off of the amount borrowed. An interest only mortgage is where you pay only the interest and a separate policy such as an endowment, ISA or pension plan to pay off the capital amount at the end of the mortgage term. Endowment mortgages have had a bad name in the past as investments performed less well than expected and the endowment policies were returning sums much less than the amount they were supposed to cover. Once you have decided the type of mortgage to suit your needs it is very easy to go online and search through a huge number of lenders products, and save yourself thousands of dollars on mortgage payments every year, but also, to save time and hassle by simplifying the loan process and reducing the paperwork.
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