Choosing Your First Home Loan

Getting on the property ladder is becoming more and more difficult for young people starting out

. However financially it makes logical sense to try and do so as early as possible to avoid wasting money on rent. Once you have put down your deposit and set up your home loan you will pay this back in regular instalments. These will feel a lot like rent and they aren't likely to be a lot more expensive than your current rent is. However unlike rent, that money is going towards an asset that you will actually get to keep and do with as you please. This will mean that you can decorate the home however you want, renovate it, let rooms and do all the other things you couldn't do with a flat. More importantly though it will mean that when you choose to move home you will get the money back with interest as you'll be selling it on after the value has raised. Property values increase all the time naturally so for this reason you should be sure to make profit when you sell, but at the same time you will also likely raise the value more by making renovations and generally improving it in various ways.

All this makes it crucial to get a home loan quickly so you stop wasting your money. Doing so with less money though while you're just starting out means that you need to shop around and find something that suits you.

If you can put down a large deposit on your first home then you should. The larger the deposit you put down the less you'll be borrowing and so the less you'll have to pay back, this will mean your profit from the property is greater overall when you come to sell. At the same time though this won't always be possible so if you are starting out without much money you'll need to find a lender that is willing to lend you a large percentage of the price. If you shop around you can find companies that are willing to lend you 80% and more of the cost of the house.

At the same time putting down a larger deposit will mean you're paying back less with each loan repayment, or that you can pay it back more quickly. This is another consideration when you take out a loan and will affect you the most on a day to day basis. For those who do not have much initial capital it can be very helpful to pay off a loan more slowly in small amounts over a longer duration. If you fall into that category then you should be looking for a loan that is flexible in its repayment.

You might also find that you need to look around for your first home loan in order to find one that will lend to you despite your age and your credit rating. If you have not much money to your name then this might have affected your credit rating badly as you may have struggled to pay back loans and credit card payments, or may have had cheques bounce. This then means that you represent a higher risk for lenders so some will not be willing to lend you the money. For a first time buyer it is important to find a company that will cater to your needs as someone just starting out.

Of course on top of all this you need to find a loans company with the lowest interest. While companies may vary by only a few per cent, this will add up to a very significant amount over a long duration on such a large loan.

by: Douglas Blair

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