Navigating the property market can be daunting for first-time buyers, especially the whole mortgage part. We look at three top tips to help you get a mortgage so you can start living your homeownership dreams.
- Take a long, hard look at your finances.
You need to have a very good idea of where you stand financially before you approach a mortgage advisor or broker. You need to know what your income is versus your expenses and roughly what you can afford in terms of monthly mortgage payments, as well as what kind of deposit you have.
The bigger your deposit the better. According to an article on This is Money, you should aim for a deposit of at least 25% of the property’s value, but if you want the best interest rates and the cheapest mortgage deals in the UK, then that figure goes up to 40%. Don’t look for the nearest roof to throw yourself off of if you don’t have that kind of money handy. You can still get fairly decent mortgages with deposits of 5, 10 and 15 per cent, but the interest rates will be higher than with a weightier deposit.
You also need to check your credit rating. A good credit rating will help you get a good mortgage deal. That’s not to say that you won’t get a mortgage if your credit history is bad; but it does mean that you probably won’t qualify for the amount you might be hoping for. If this is the case, it’s probably better to improve your credit rating before applying for a home loan. There are several online resources that offer free credit checks, including Experian.co.uk and UKCreditRatings.com.
Mortgage lenders or providers will go over your finances with a fine-tooth comb, but it helps to have as much information handy as possible.
- Don’t settle for the first mortgage deal with comes your way.
In fact, you shouldn’t necessarily pick the cheapest mortgage rate either – not without subjecting it to minute scrutiny. Would you like to know why cheaper isn’t always better? We’ll tell you: Because sometimes there are ‘hidden’ fees. Mortgage expert David Hollingworth says that some mortgage lenders offer low rates but have high arrangement fees, while more expensive deals might have low arrangement or even no arrangement fees. Furthermore, some mortgage providers throw in some nice extras, like free valuations, while others might offer various financial incentives, such as cashback deals.
So, it pays to not only shop around but also to invest in a strong magnifying glass so you can read all of the small print.
The internet is a great place to start looking for mortgage providers, as you’ll find a variety of comparison sites online that help you pinpoint the best deals. You’ll also get a rough idea of what kind of mortgage you qualify for with free mortgage calculators. This is great prep before you make any appointments.
One final note on choosing mortgage brokers: always check that they are listed on the FCA register. This authorises them to provide you with expert mortgage advice.
- Know the difference between the different types of mortgages available.
There are host of options available in the world of mortgages. We’ll cover the different types of mortgages in more depth in another post, but for now it’s enough just to get a quick snapshot of each:
- Interest-only mortgages. These are high-risk for mortgage providers, as you only pay the interest due each month. This requires a significant lump sum at the end of the term. As a result, they are not easy to come by.
- Tracker mortgages. The interest rate on these mortgages depends on the national interest rate; so if the national rates go up, so do your monthly repayments, but if they go down, you’ll be sitting pretty.
- Standard variable rates. These are determined by the mortgage lenders, so they vary from provider to provider.
- Fixed-rate mortgages. These are what they say on the box. The interest rate is fixed for the duration of the mortgage term or for a predetermined period of time.
- Guarantor mortgages. Guarantor mortgages are a good idea for first-time buyers, especially if they want to get the best possible deals. Basically, parents or other close relatives guarantee the mortgage. They take on the onus of payments if you can’t make them anymore.
No one ever said that buying a house is easy, but getting a mortgage doesn’t have to be as tricky as nailing jelly to a tree. With a little bit of help and some expert advice, even first-time buyers can waltz through the process relatively unscathed.
So, give us a call if you need help buying or selling a house. And remember, the property market isn’t nearly as scary as it’s made out to be.