First time buyer to be with lots of questions!

cakieface · 21 January 2011 at 6:52PM

Hello all.

Well, me and my husband are now in the position of wanting to buy a place. We have 2 young children and finding renting more and more demoralising although living in London we have had little choice.

We are now thinking about venturing into the scary world of being property owners.

We have saved up a lot of money by working bloody hard over the years so we have enough for a healthy deposit. However, we would also like to get a mortgage so we don't pile all our savings into a property. Being mortgage newbies however, we don't know very much about mortgages, so have a few questions.

1) Looking at mortgages, for example, First Direct's, does a fixed rate mortgage mean it stays the same amount over the term, so for example if we were to get a £100k mortgage for 5.08% fixed for 5 years, does this mean we will always pay exactly 5.08% yearly on the £100k (and as it reduces, 5.08% of the remaining sum) or are there other hidden figures/can a fixed rate increase over its term due to interest rate rises or is this only variable rate mortgages?

2) Can someone explain how a Standard Variable Rate works and how/if it applies to a fixed rate mortgage.

3) Is it possible to get mortgage payment insurance that really does pay out in full and fully cover the mortgage should one or both of us get ill and are unable to work? If so, would it run for the term of our illnesses even if this stops us working for several years? Is mortgage payment insurance a con or is it worth getting?

I'll probably have more questions but I think that is enough for now.

Thanks!

RosieTiger · 21 January 2011 at 7:10PM

A fixed rate Mortgage is exactly as it describes itself, the mortgage will be fixed at the agree rate for the agree period of time. There will almost certainly be restrictions applied to this should you want to exit early or pay additional overpayments.
the standard variable rate is one that will move as and when the lender moves it, generally in line with the bank of Englands changes, but not always.
Can't comment on insurance as we have never used it.

I would strongly urge you to seek financial advise on this as these are key decisions for your future which you need to make sure are the best for you!