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The Skills You Need to Find the Right Mortgage
Securing a mortgage is one of the most important steps you can take in life, and yet it is also something of an uphill struggle, especially if you do not have the skills needed to find good deals from amongst all of the options available.
To rectify this, here is a look at the capabilities you should develop and foster if you want to turn your dream of home ownership into a reality, or if you already have a mortgage but you are interested in improving your circumstances by switching lenders or changing your package.
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Getting to grips with mortgage rates
Perhaps the most significant skill you need to get the right mortgage is that of understanding how interest rates impact the affordability and relative value of the different deals that are out there.
Mortgage rates are impacted by a variety of factors, from the current economic climate to the specifics of your own financial situation. And thankfully, appreciating the basic principles of how they will influence which mortgage package is worth picking up is not too tricky. This is especially true since you can rely on a site like MoneyWise to check up on the latest rates and get insights into the current mortgage market.
Expressed as a percentage, mortgage rates will tell you how much interest you will be paying on your home loan annually, so of course they also dictate the amount you will be repaying each month.
The greater the rate, the higher your monthly repayment will be. Unfortunately, lower rates are not universally available, as you will need to fulfill certain criteria to be eligible for the best packages. The factors that affect this tend to be within your control to a degree, although it may also be helpful to speak with a qualified advisor or broker if you are uncertain.
Another aspect of mortgage rates that you should not overlook is whether the rate is fixed or variable. Variable rates are more of a gamble, because while a package of this kind could become more affordable if rates drop over time, it could also go in the opposite direction.
Fixed rate mortgages give you more stability and less risk, letting you know exactly how much you will be repaying each month, at the cost of being locked into the same rate for anywhere from one to five years, depending on the deal and the lender in question.
Finally, you should learn to be scrupulous when assessing mortgage rates, since even the smallest difference can have a major impact on the expense of repaying your home loan, both from month to month and in the long term.
Even fractional differences between deals can leave you spending hundreds more each month, and hundreds of thousands more over the lifetime of the mortgage. So, attention to detail when comparing mortgage rates is essential if you want to make home ownership as affordable as possible.
Improving your credit score
Your eligibility for the best mortgages is dependent not only on things like your income and the size of the deposit you have squirreled away, but also on the shape of your credit history. This is easily summed up by your credit score, and while there are a few agencies that have their own scoring systems which prospective lenders can check up on, the overarching elements which determine your position on each scale are broadly the same.
Major factors include the amount of debt you have to your name, the repayment track record you have built up over the years, the number of credit checks that other organizations have carried out on you recently, and whether or not you have been approved or denied credit in the past.
Getting into the habit of checking your credit score regularly, and even drilling down into the details by looking at your credit report, is a good idea. Indeed you may not even be able to apply for a mortgage until you have secured a solid score in the first place, so it is better to be aware of this and hold off on your application until you have got yourself in as strong a position as possible.
Also bear in mind that a bad credit score does not necessarily mean that you have been irresponsible with your money in the past; it might simply be as a result of you not having much of a credit history to vouch for your habits. Using a credit card to make purchases and paying off the balance in a timely manner can help build up your credit history and boost your score if you are struggling, for example.
This should also teach you good money management skills in the process, while also alerting you to any issues which might be holding you back.
Finding the right mortgage is vital because this outgoing does not exist in isolation, but rather needs to be considered in the context of the rest of your living expenses.
This means that the ‘right’ mortgage is entirely dependent on the needs of the individual, rather than there being one ideal package that is appropriate for everyone.
Growing your skills of budget management is key in this scenario, and establishing boundaries and limits will allow you to spend and save more responsibly, ideally without pushing you too far down the road to outright asceticism.
Good budgeting is as much about calculating essential outgoings, including your mortgage repayments, as it is about tracking your expenses and seeing where your disposable income is going each month. This kind of proactive approach will let you detect otherwise invisible patterns in your spending, and perhaps show you where there is the potential for eliminating unnecessary or wasteful spending.
The skills you need to find the right mortgage can either be developed through experience or secured by working with a pro in the field to get further advice, and a combination of the two should stand you in good stead going forwards.
About the Author
Ron Evan is a Digital Marketing Specialist and a writer who takes his time writing articles about traveling, psychology, and digital marketing. He learned about the digital marketing industry accidentally almost four years ago. He is currently based in Taiwan, taking an MBA degree with a focus on Marketing. During his free time, he enjoys going to karaoke, reading a good book, or watching Netflix.