by Simon Wright

Created on: August 16, 2008   Last Updated: August 20, 2008

Everyone dreams of owning their own home. In recent years, however, young people could be excused for despairing at ever having the opportunity to get on that all important first rung of the property ladder. House prices had risen to such levels that people were being driven to ever more risky strategies, such as taking on 100% mortgages, or stretching themselves to the absolute limit in terms of monthly mortgage repayments. Given this backdrop, it's all the more important that you get the right mortgage.

What to look for in a mortgage?
The vast array of mortgage packages on offer can be bewildering. However, not all mortgages are the same and it pays to shop around. The attributes to look out for include:

- Interest rates. Clearly, you want a mortgage that offers the lowest possible interest rate. Even a 1% difference can create a huge cost saving over the mortgage term.

- Fixed or variable pricing. Fixed rate mortgages offer you the security of knowing that your monthly payments won't go up during the stated timeframe. A typical deal might be a five year fixed rate mortgage. After the first five years are up, the interest rate will revert to a variable basis. If you go for a fixed rate deal, make sure that you can cope with any subsequent reversion to a variable rate. Variable rate mortgages may go up or down depending on the prevailing economic conditions.

- Flexible repayments. It's to your advantage to pay off the mortgage as quickly as you can afford. That way you will minimize the amount of interest that you end up paying on the mortgage. Some mortgages are flexible and allow you to make additional lump sum or ad hoc payments. Others, however, may charge a fee if you decide to repay the mortgage earlier than the stated term.

How much should you put down?
For the most part, banks will ask you to provide part of the cost of the house in the form of a downpayment. This is often 10% of the cost. So if you were buying a house for $100,000, the bank would expect you to stump up $10,000 and pay the rest via a $90,000 mortgage. The general rule, though, is that you should put as large a downpayment as you can comfortably afford. Don't leave yourself without any savings buffer but the more you can pay up front, the cheaper your purchase will be.

How long should you take to pay off?
Again, the rule is that the sooner you can pay off the mortgage, the better. You have to balance this, however, against how much you can afford to pay off each month. It's worth remembering

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