Thursday, July 18, 2019
Borrowing

How much Difference Does having a Larger Mortgage Deposit make?

When we are taking out a mortgage we normally have to save up a deposit. This is so that we can show the lender that we are capable of budgeting our money and also so that there is some equity in the property so that if the lender has to sell it, due to non payment then they will still make their money back. Most people will provide the minimum they need to, but there are advantages of providing a bigger deposit and so it is worth considering them.

Borrow less money

If you provide more of a deposit then you will not have to take out such a big mortgage. Borrowing less has many advantages. You might be able to repay it over a shorter term, meaning that you will be able to repay your loan sooner. You will have smaller repayments which means that it will be manageable. You will be charged less interest and so your loan will be cheaper. You may not think these are that important but they can make a significant difference. If your expenses go up or interest rates rise, then having repayments that are not too high will really help you to cope better. If you can repay the loan quicker, it means that you will be paying less out in costs and you will own the home yourself more quickly. If you have lower costs then you will have more money for yourself rather than paying it to your lender. It is well worth calculating how much different it could make. Ad dup how much extra interest you will pay if you have less of a deposit and you will be able to decide whether you think that it is worth it with regards to the savings you will make in interest payments.

More borrowing options

If you are offering a higher deposit then this may mean that you are able to choose between more mortgage lenders. Very few will allow you to borrow with no deposit, some with a small deposit and others will want more. If you have more of a deposit to offer then you will be able to pick from the mortgage types that want a higher deposit as well as those that are okay with a smaller one. This will expand your choice and mean that you might be able to get a better mortgage deal than you otherwise would. It can make a really big difference in what you end up paying in interest if you pick the right lender. There are some big contrasts between the different ones and you could make huge savings if you have more of a choice and can pick the ones that offer the very best value for money. Although having a bigger deposit does not guarantee a better deal, it will certainly improve your chances of getting one.

Repay more quickly

If you pay more of a deposit then there will be less money to repay. This could mean that you will repay the mortgage more quickly. This can be a relief for some as the burden of the debt will be gone. Some people get really worried about owing money and so it can be a great relief to them when that debt is paid off and they know that they no longer have it. Others may not worry so much about being in debt but there are many financial advantages they might like. For example if you are able to repay earlier it means that you will then have more money available for other things, perhaps such as holidays, being able to give money to children or grandchildren or being able to retire earlier. You may also be protected against any interest rate rises which occur after you have repaid the mortgage too, although there is of course a chance that the rates may go down as well as up.

Can buy a dearer house

Some people like to use their larger deposit to be able to buy a dearer home. This will negate any advantages of having a cheaper mortgage, shorter repayment term and easier to manage repayments. However, it will mean that you have all of the advantages of having a more expensive home, which could mean that it is bigger, is in better condition or in a more favourable location.

Conclusion

So there are many reasons for why having a larger mortgage deposit could really advantage you. This means that when you are saving up for a deposit you really need to work hard in order to make it as high as you possibly can. This could mean that you have to take longer to save it up and that you delay buying a home for a while. However, it could be worth it if you save money or are able to buy a more perfect home for you.

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Guarantor Loans

Should you ask a Sibling to be a Guarantor for you?

A guarantor loan can be a great way to be able to borrow cash if you do not have a good enough credit rating for any other type of loan. It can mean that you will be able to get money that you need without having to borrow off friends and family or by using other more expensive means. However, if you do take out a guarantor loan you will need to ask someone to be a guarantor for you. They will need to be someone that has a good credit record an dis willing to make any loan repayments that you might not be able to afford. Many people will ask family and it may be that you decide that it will be best to ask one of your siblings.

Advantages

By asking a family member it means that you do not have to tell your friends that you have financial problems, which could be something that you have concerns about. It is not always something that we will want to make public knowledge. Sometimes families can be more forgiving of situations like this and they may already be aware of your situation anyway. Obviously if you are aware of their financial situation you will know whether they are likely to be able to help, but if you do not then you may have to ask them about it.
Even if they cannot help you they are more likely to be understanding and not tell anyone else of your situation. They may even have some helpful advice which could enable you to be able to get the money that you need.

Disadvantages

Sadly there are rather more disadvantages than advantages, as there often are with these things. It is important to make sure that think about whether them helping you like this might have a negative impact on your relationship with them. If you take up the loan and make all the repayments then it is unlikely to impact them at all and therefore there should be no problems with it. However, it is if you miss a repayment that it could become tricky. They will then be expected to make the payment instead and as that is what they have agreed to do, they should not be surprised and should be in a financial situation where they can afford to do this. However, if this happens lots of times then it could get harder for them as it may have a significant impact on what money they can spend. They may also expect you to quickly repay them the money that they have paid on your behalf and you may not be in a situation where you can do this. This could cause problems between you.

It is therefore a good idea to have a chat with them beforehand about what their expectations will be with regards to nay payments that they have to make. Agree on whether you will need to pay them back and when you might be able to do that. Make sure that they are aware that although you will try your best, there is a chance that they will have to make every repayment for you and that you may not be able to repay them very quickly. Although no one will want to think that this will be the case it is best to assume the worst and prepare them and come up with a plan in case this happens. Write down what you have agreed on and then you will have something to refer back to and it should help to prevent you form arguing and falling out over it.

You may even find that you might fall out with other family members over it too. Perhaps your sibling gets your parents or other siblings involved and they put pressure on you about it too. This could lead to all sorts of problems within the family. This is something that no one wants and having a good family relationship can be really important so it is wise to think through the consequences before you start.

Conclusion

So although asking a sibling to be a guarantor may seem like a really good idea, there is the possibility that it may not turn out that well. It is therefore worth thinking it through hard first and then discussing things at length with them before you go ahead. They may really want to help you out and be perfectly happy to pay any repayments that you miss, but you will need to be sure of that and to also to have a written agreement so that you know that you are thinking the same things from the start. Hopefully you will then protect yourself form falling out with them or any other family members.

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