Back to: Homeownership
When you apply for a mortgage, you will agree a length of your mortgage term. For a first-time buyer this is usually between 25 and 40 years. This is the amount of time it will take for you to pay off your mortgage loan in full and own your property ‘out right’. But during your mortgage term, you will also need to select a ‘product’ from a lender, and you will do this multiple times throughout the term. This is essentially the type and cost of the mortgage for a set period of time. For comparison, if you wanted to buy a laptop when you were 15, you might want one that is great for gaming, but also has word for your school work. When you’re 30 you might no longer need one for gaming, but one with more memory for family photos and videos and full use of outlook for work. The product you want will change depending on your needs and environment at the time – that’s a bit like getting a mortgage product.
When you’re first buying you may have less money and want to keep your payments lower, so you stretch the payments over 40 years and go for the cheapest possible product rate, this may mean paying a fee and adding this to your balance. When you get a bit older, you may be more aware of the market and unsure if interest rates are going to drop soon, so you choose a product with no early repayment charges, but at a higher interest rate so you can change it at any time with no cost to yourself.
You want to get the mortgage product that is right for you. They all have different conditions, cost and benefits and are all relevant to the mortgage market at the time. Your broker will discuss all your options with you each time you change your mortgage.