Your first mortgage is likely to be one of the biggest financial commitments you make in your life. It is important that you get it right the first time. This is what we are here for, to help you get it right the first time.
What is a mortgage anyway?
A mortgage is basically a loan made by a financial institution to you with the debt being secured on your property. You repay the financial institution the capital and interest on the loan over the mortgage term. Mortgage come in all shapes and sizes:-
Fixed Rate mortgages– the interest is fixed for a period of the mortgage so the monthly payments stay the same for the duration of the fixed period.
Capped Mortgage– the interest that you pay is capped i.e. the interest can’t go over the rate that the mortgage is capped at during the capped period, however, if rates drop the rate of the mortgage can drop and so the monthly payment can fall.
Standard Variable- The mortgage payments will vary as the financial institution’s interest rates change, this usually reflects the rate set by the Bank of England that you see on the news.
Tracker Mortgage– The payments track the interest base rate by a fixed margin e.g. base rate plus 2%. So payments can vary and become more volatile if the Bank of England decides to put up rates.
As you can see there is a lot to consider when taking out your first mortgage without even considering insurance. Make the right move use one of our expert mortgage advisors for your first move.
Can I Get A Mortgage?
This is a question that can only be answered once one you have spoken to one of our specialist advisers. You will be able to get an idea as to whether you fit the criteria from reading through our pages. If you have a good level of income and a good credit history then you will fit the lending criteria for most lenders. Mortgage applications can be complicated and when applying the following will be taken in to consideration by lenders.
- Employment Status
- Credit Score
- Property Type
- Many Other Factors
Each lender is different and has different criteria for lending this is why it is a good idea to speak with an experienced mortgage broker.
How Much Can I Borrow?
This depends on a number of factors including your current income and any commitments you already have (credit cards, loans etc). Usually lenders will lend on average 4x your current income, this can go up to 5x or even 6x your current income with the right circumstances with some lenders.
Every lenders is different some will just take your salary into account and other will take all sources of income into account including state benefits, overtime, shift allowance, dividends, investment income and overseas income.
There are a lot of factors that go into how much you will be able to borrow and it will vary from lender to lender. If you want to know exactly how much you can borrow speak with one of our mortgage specialists for free advice.
How Much Deposit Will I Need?
A mortgage deposit at a minimum will need to be around 5% and more deals are becoming available for low deposit mortgages. The more you can save for your deposit the better rates you are likely to get. The best rates are reserved for buyers with larger deposits of 25%. With rising house prices large deposits can take a long time to save for and it may make more financial sense to secure a mortgage with a 5% deposit if you are renting and can’t afford to save a lot each month. This will allow you to get onto the property ladder and start building equity in your home, you will then be able to remortgage to a better rate further down the line when you have more equity.
If you are looking to buy a house at a value of £200,000 then you will need £10,000 in savings for a 5% mortgage.
Usually your deposit will come from savings or inheritance but lenders are also willing to take help from family, A Gifted deposit is where a friend or family member lends the buyer some or all of the deposit necessary to get a mortgage. There are certain rules around gifted deposits and you will usually need to complete a gifted deposit letter or a certain form depending on which lender they are using. It is advisable to speak with an experienced mortgage broker about gifted deposits to ensure that you get your mortgage application right.
First Time Buyer Government Schemes
In recent years the Government has created several new schemes to help people get on the property ladder
Help to Buy Scheme – The help to buy scheme helps first time buyers get a mortgage with just 5% deposit. The government will guarantee 20% of a property value up to £600,000
Right to Buy – The Right to buy scheme is where your local council or housing association gives you the right to buy your rented council house if you have lived there for a number of years usually at a large discount. This discount can be used as the deposit, this means that you can get a 100% mortgage and own your property. For Example if you have lived in your council house for 5 years and are eligible for the right to buy scheme and your house is valued at £80.000. The council would allow you to buy this for £55,000 giving you equity in your house that you can use for the deposit.
Shared Ownership/Equity – If you cant afford to buy 100% of the home that you want the shared ownership scheme allows you to buy a share in the property (between 25% to 75%). Then later on when you can afford it you can purchase a larger share or the remaining share to won it outright.
Should I Use A Mortgage Broker?
If you have any unusual circumstances, don’t understand the process or are looking to find out if you are eligible and how much you can borrow then it is advisable to speak with a mortgage broker to gain the information that you need without risking being declined by a lender. If you have any missed payments or marks on your credit score a mortgage broker will be able to guide you to lenders that are more likely to consider your application.
The advantage of using a first time buyer mortgage specialist is they know the market and they know the criteria of each lender this allows them to make better decisions and potentially approach lenders that you are more likely to be accepted with. If you apply direct and get declined this can impact your credit score so it is best to minimise the amount of applications you make to different lenders. If you have already been declined don’t lose hope our specialist advisers can help.
Fill in a contact form or give us a call to discuss your requirements.