Purchasing a house
If you're looking to buy a home, you'll probably need to apply for a mortgage. It's a loan which is secured against the value of the property.
The mortgage will either be:
- a repayment loan, where you pay back a proportion of the loan plus interest each month; or
- an interest-only loan, where you pay the interest on the loan each month but not the loan.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Some buy to let mortgages are not regulated by the Financial Conduct Authority.
In the current mortgage market you'll need a deposit of at least 5% of a property's value to get a mortgage.
Getting help to buy your first home
You could use the Help to Buy scheme if you have at least 5% deposit. Help to Buy is a government scheme for those who have a small deposit, when buying a home.
Types of Mortgage
Fixed rate mortgages
Monthly payments are fixed for a set period of time.
Variable rate mortgages (tracker)
Payments are variable, this means they could go up and down depending on the movement of the Bank of England's Base Rate.
Capped rate mortgages
Interest payments may vary depending on an interest rate set by the lender but they can't go above a certain amount.
This is where your savings are placed in an offset savings account, the amount in your savings account can help reduce the interest you pay on your mortgage debt.
Affordable home ownership schemes
You may be able to get financial help through a government home ownership scheme if you live in England and can't afford to buy a home.
The 4 types of home ownership schemes are:
- Help to Buy: equity loans
- Help to Buy: mortgage guarantees (available across the UK)
- shared ownership
- Help to Buy: NewBuy