property investment

If you’ve recently bought a house partially, you’re probably worried about your monthly mortgage. It’s tough planning for the future when you have expensive mortgages to pay so it’s much better if you are well aware of how you are going to be charged the following months. 

What most people don’t know is that there are many factors that can affect your mortgage interest rate. Ideally, you want lower than usual rates of course. Though this is mostly determined by the agency you bought the property from, there are ways through which you can affect the interest. 

Agents know about these factors that affect your interest rate. You should know about these too so that you can at least have a chance at getting fair monthly mortgage payments. Here are a few important factors that you need to consider.

Credit Score

Whether it’s loans in a bank or counting your interest rate for your mortgage, it’s worth noting that credit score is always an important factor. Lenders will do an in-depth look into your credit history. If they are going to lend you money for a house, they need to learn if you are a good payer first. 

There are many ways through which you can improve your credit loan. The important thing to know is that you need to repay your loans on time at all costs. You should also avoid having multiple loans at a time because these are bad in the eyes of lenders too. 

There are three main credit references in the UK and each of them has varying qualifications for what’s considered a good credit score. Equifax sees 467 to 700 as excellent, Experian sees 961 to 999 as excellent, and lastly, TransUnion’s highest standard is 628 to 710.

Loan-To-Value Ratio

One factor that directly affects your interest rates is your initial deposit for the property. The loan-to-value ratio refers to the amount you are looking to loan for the property as compared to its full value. Needless to say, the lower your loan, the better your interest rate will be. 

If you are eyeing a property, make sure to save enough money for a big initial deposit. Using tools like a UK mortgage calculator to check how much you’ll have to pay for a certain deposit amount. This is planning for your future at its finest.

Housing Market Conditions

Real estate can be a fickle industry. One moment, houses are cheap. Next, houses are expensive. Housing market conditions play a huge role in interest rates. The better the condition the market is in, the lower your interest rates are. 

One way to know if the housing market condition is good is by checking the news if properties are being made and sold left and right. 

It’s basic supply and demand. The more properties there are, the lesser interest rates are going to be because firms are looking to hook people with cheaper properties as the competition is stiffer. The lesser properties there are, the higher interest rates are because firms know that people are willing to pay extra due to the scarcity.

Location

The location of the property also matters when it comes to calculating your interest rate. As a general rule of thumb, properties in cities and residential districts are more expensive. Meanwhile, properties in rural areas are much cheaper at the expense of being further from the city. 

If you have no issues with living in quiet little towns, then you should opt for these properties instead. However, if you like living close to the city or if you have to because it’s closer to your workplace, then prepare to pay for higher rates.

property investment

Loan Terms

You should treat mortgages like any other loan conditions that you get into. The longer you pay for a loan, the pricier the final price will be. It may seem like you are paying for less of your term than 10 years but if you calculate the final price, you’ll be surprised at how big the interest rate actually is. 

Make it a must to calculate the overall amount that you have to pay for the mortgage.  Of course, it’s more practical to pay off your loan for a shorter amount of time. 

Mortgages are indeed heavy on the wallet but you’ll have to tough it out if you want to keep your dream home. Interest rates are too heavy to shoulder for some but so long as you know what factors affect it, you can easily do some steps to make it less.

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