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Key Terms to Help You Understand the Property Ladder

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Now, most of us will not move straight out of home and step into our first mortgage. In fact, getting a mortgage seems to be more difficult than ever. The cost of living and housing is on the rise, and the wages we are paid don’t seem to be quite keeping in line. So it’s not all too surprising that we want to work towards improving our careers, getting promotions and increasing our wages before we settle on a property that we intend to live in for years and years to come. When we are young, we also may be unsure of exactly where we want to settle. These are all reasons that we tend to be renting for longer, or in many cases, indefinitely. However, it’s always good to consider working towards a property of your own. This way, you won’t be throwing money down the drain. Your monthly payments will be going towards paying off something that will be entirely yours eventually. So, to help you along the way here’s everything that you need to know about the property ladder and what you can expect from it.

property ladder

What Is a Mortgage?

A mortgage is the loan that you can apply for in order to purchase a property in the first place. You can expect to make repayments on it for around 25 years (though this may vary depending on the kind of deal you take out). Look for an option with the lowest interest rate possible. You can use a mortgage calculator to help you to work out what kind of mortgage you can afford on your salary and thus what price properties you should be aiming for. This is the most common use of the term “mortgage”. However, there are other types of mortgage on the market, such as reverse mortgages. These are used by people who already own homes who want to take some equity out of their property. Again, there are calculators out there that you can use if this is something that you are considering. Try out a reverse mortgage calculator without personal information if you wish to maintain your privacy.


What Is a Deposit?

Almost every property that you look at will require you to put down a deposit. This is a large lump sum of money that you can lay down to secure the mortgage and the property itself. There is no standard amount that you need to save before you have a deposit and the expected amount will vary on the overall price of the property you’re looking at. The more expensive the property, the larger the deposit will usually have to be. Generally speaking, you should aim to save up 20% of the overall property price. However, nowadays, the market is offering a little more variety when it comes to deposits. The presence of 90%, 95%, and even 100% mortgages on the market are on the rise. This means that you’d require no deposit, or only have to gather up a 5% or 10% deposit. However, it’s always good to bear in mind that the larger the deposit you put down, the smaller your subsequent repayments will have to be.

While there are plenty more technical terms when it comes to purchasing houses, these are perhaps the two most common words that are going to crop up time and time again throughout your home-owning journey. So it's best to understand them sooner rather than later!