Mortgages

One of the important terms to understand when it comes to investing in property is that of ‘leverage’, also referred to as ‘gearing’. The principle of leverage relies on the fact that a percentage increase on a larger amount produces a larger profit. To leverage your money, therefore, you borrow as much as you can, with as little of your own money as you can, to buy property. With £100k you could buy one house and benefit from the capital growth on that one house. Alternatively you could borrow as much as possible from the bank, ending up with £500,000 worth of property and benefiting from the capital growth on that.

To leverage your money effectively, you will need to gain an understanding of mortgages. A major key to this is finding a good Independent Financial Advisor, as they will search for a mortgage which specifically meets your requirements. Some Financial Advisors charge a brokerage fee, for which you can expect to get much better service. A mortgage is a product - like the house that you’re buying with it, so you should always know the ins and outs before ‘purchasing’ it. You should always be careful to look for hidden costs - don’t immediately go for the mortgage with the lowest interest rate.

Interest rates aren’t as complicated as people make out, so before you make a decision based on them, educate yourself. If you have a good Financial Advisor they will be able to advise you about how interest rates work and how they are likely to affect you. One way to think of interest rates is simply the ‘cost of money’. We recommend always working with fixed interest rates. They may look less appealing at the outset, but they allow you to plan ahead more effectively. Rates are often considered the most important factor when evaluating mortgages, but you should keep a keen eye on other fees, as you may end up paying more.


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