One of the best long-term investments is buying a home of your own. There are several advantages to it, and it makes a lot of financial sense if you can afford a home. Firstly, you have a place to call home with no worries of dealing with landlords, moving from one place to another, paying rents and doing stuff that you need to redo in the next rental home. You don't need to keep asking your landlord to do maintenance. You can do whatever you want, and it stays.
The million-dollar question is what to do if you can't afford a home but want one and think it is the right to get one of your own? The answer is relatively simple, a well-thought-out home loan at affordable rates and suitable fee structure will do the job. If you have a stable job, regular income, good credit ratings and no significant liabilities that you need to handle, it should not be that difficult.
Still, it is best to be thorough with your homework when looking for something as long-term as a home loan. Think of it like this, would you buy a home without going over a million things and trying to get the best deal in terms of price, location, size and countless other factors? Probably, no. Then it is best to choose a home loan with just as much care and planning. It might save you a whole lot of trouble later.
You would need first to take stock of your finances and work out the size of your home loan and loan term. It would require you to know all about stuff like floating and fixed interest rates to begin looking for actual home loans.
If you are looking for private loans the UK to buy a home, there are a lot of private financial institutions that offer attractive interest rates on home loans and depending on the length of the loan term. Interest rates could go higher.
This is why you need to make careful and calculated choices to avoid defaulting on your home loan sooner or later because it could wreck your credit scores and your finances as well.
We can begin by comparing a different kind of interest rates to find out a little more about what to look for in a home loan.
This type of interest rates keeps changing with prevailing market conditions and is also known as variable interest rates. Some of the pros and cons are:
In the long-term variable loan rates are known to bring down the total loan costs.
Helps generate greater savings when interest rates are on the decline.
Interest rates tend to be lower as compared to fixed interest rates on a home loan.
It can go up and down with fluctuating market conditions, making it unpredictable and hard to budget or plan around.
The higher amount of risk as compared to fixed interest rates.
Suitable for very long-term (20-30 years) when it’s impossible to be sure if market conditions will favour a lower interest rate or not.
This type of loan interest rate remains fixed throughout the term duration. It does not correlate with market conditions and hence does not create an element of unpredictability in planning the repayment over a long term.
It remains unaffected by prevailing interest rates, change of regime or anything else. You can feel secure and plan or budget around it easily.
It offers a lesser amount of risk and greater security over variable loan rates.
It is best suited for loans with term durations that range anywhere from 3-10 years.
When market conditions allow for lower interest rates to be paid under variable loan rates, you will still need to pay the same fixed amount in terms of monthly EMIs.
Total loan costs may end up higher as compared to variable loan rates. This holds great significance for homebuyers because it is a sizable asset, and loan term duration can easily be longer than 10 years. And go up to 20-30 years when variable loan rates might cut down on loan costs.
It is always best to look for private loans UK home loans from traditional lenders that offer standardized loan rates of both variable and fixed type. It would not be wise to go for an online lender or some quick scheme that offers attractive interest rates on your home loan. Especially so, if you cannot be sure about the credentials of your lender.
One of the significant financial benefits of buying a home is the kind of long-term appreciation you can look forward to, apart from saving a whole lot of money on paying rents and moving around. To make sure that there is no chance of a spoilsport due to poor planning, look into every aspect of your home loan carefully before making a choice.
It is another kind of lifetime relationship that you share with your home, so it is best to ensure your financial relationship with home through your home loan is equally fulfilling.