An Intro Into First Time Buying
Buying a house can be a daunting but exciting experience, especially if it’s your first time. There are so many things you need to know to ensure that your application is approved in the best time possible.
The process of applying for a mortgage can be a tedious one. It requires countless months of saving, hours spent looking for your ideal home, reading up on finances and mortgage advisors/lenders. Whilst it might seem like an arduous task, it is also incredibly rewarding and is a fantastic milestone to reach.
Whether you’ve just decided to start saving, or if you’re about to put your well-earned deposit down on your very own home, you might have some questions or concerns. Hopefully, this guide will help you navigate through a few points to consider when buying a home.
Save, Save, Save!
The first and arguably the most important step in taking out a mortgage is – saving for the deposit. As you’re probably aware – the bigger the deposit, the better it looks in the eyes of the lender assessing your application.
Furthermore, you need to account for any associated fees, valuations or examinations, legal fees etc. which will depend on the companies you use.
When a bank assesses your mortgage application, they take a range of factors into consideration. For instance, your annual and monthly income, your monthly expenses, your credit file, any debt you may have and your ability to reliably pay money.
If you can show your potential mortgage lender a documented history of reliable saving, it is likely to go in your favour. It not only shows that you can comfortably pay your bills on a monthly basis, but that you have a responsible profile for borrowing money.
There are government schemes that can help first time buyers save, such as lifetime ISAs and savings accounts. Your best bet is to browse the market and see which product suits you the most.
Compare Rates and Terms
If you don’t want to use a mortgage broker, compare as many rates as humanly possible.
It may be worth considering the interest type too. Mortgages can offer a variable interest (based on the Bank of England base rate) or a fixed rate, which will be fixed for a period of time before reverting to a variable amount.
It’s impossible to say whether a fixed interest rate is more beneficial than a variable one, as it does depend on your own preferences and financial requirements. If you’re unsure of what to do in this area, we’d recommend that you do consult a mortgage advisor directly on matters like this.
You should also compare rates between different energy or utility providers before you move in. This will give you an idea of what your average energy bills will look like. As a side note, record your energy readings on the DAY of moving in so you know what your starting point is in usage. Also, give this to the energy provider upon opening your account.
Clear Your Debt as Much as Possible
Debt can be useful in a variety of situations, as it can pull you out of potentially difficult circumstances whilst allowing you to build a credit score. However, individuals that still have any payday loans or outstanding car finance when applying for a mortgage will struggle.
By paying off your debts before you apply, you’re showing yourself as a low risk investment to the bank, with the financial ability and willingness to clear off any owed amount.
Overpaying On Mortgage Repayments
A mortgage is probably one of the largest investments you’ll make in your life, so it might make sense to pay it off as quickly as possible if you can. Now, we understand it’s not within everyone’s means to make massive extra payments, but even a small amount could quickly add up.
For example, an extra £50 per month obviously adds up to £600 over the course of a year, which can go a long way.
For instance – if you have a mortgage at a rate of 4%, and a total mortgage amount of £150,000 with 20 years until it finishes, your month-to month repayments would be around £900. Using that £50 a month to top this up (with the repayments staying as they are) this could save around £5,000 in interest that you would be paying the bank! Furthermore, this would reduce your mortgage term by a year and a half.
Overpayments come with some benefits. However, it will depend on your circumstances and rates/terms. If you do have any questions, query this with either the bank you intend to borrow from, or a suitable mortgage broker/advisor for tailored details.