Whether you’re moving house from rented property or moving out from your parents’ home, getting your first mortgage is likely to be the most important financial decision you ever take, and it’s essential to get the right solution. Here are seven of the most important things to know.
What Repayments You Can Afford
Most lenders will refuse a mortgage if they don’t think you’ll keep up with the repayments, so it’s important to be sure of this yourself and have all the figures at your fingertips when you speak to the advisor. You’ll need to consider not only your income but also your essential spending.
Your Credit Rating
Check your credit rating with one of the credit reference agencies, such as Experian and Equifax. If your rating is low, you may not be able to get a mortgage. You can sometimes improve it, though, for instance by closing unused credit card accounts and reducing any outstanding debts.
What Kind of Mortgage Would Suit You
Lenders offer a range of mortgages, depending on whether you pay off capital or just interest, how repayment levels are determined, and whether penalties apply for early redemption. You’ll be advised on this when you go to discuss your application, but you should have a good idea of what you need and why.
Moving into a home is a family project, and it’s as well if every member of the family has some say about it, even if it’s you and your partner who make the final decision. That decision could mean the difference between happiness and stress, so it’s worth taking the trouble to make the right one.
What Extra Costs May Apply
Besides stamp duty, which applies to all but the cheapest properties, there will be fees involved in the sale and ongoing costs such as maintenance and building insurance. Discuss this with independent advisors or any homeowners you know and get a good idea of what to expect.
How Much Deposit You Can Afford
You’re unlikely to get a mortgage unless you can put up a deposit of at least 5%. In general, the more deposit you can pay, the better risk you’ll be seen as. You may be able to increase this with a low-interest loan from the government’s Help to Buy scheme.
What Kind of Property You Want
Although you need to be realistic financially, it’s easier if you have a clear idea of your ideal property. Check out the market in the area you want to live in and establish a target, even if you have to modify it later.
How Long the Process Might Take
Arranging a mortgage can be a lengthy process, and if you wait till you’ve found the right property, you risk losing it. Start checking out your options before you start searching, and you may be able to agree a mortgage in principle before you find a property.