Once you’ve found a property you love and want to buy, it’s time to consider the most important part – your mortgage. There’s no point in rushing this stage, because a bad deal will stick around for years. Whilst you can remortgage and get an improved interest rate at a later date, it pays to be on the ball and know the ins and outs of getting a mortgage at the first time of asking.
This is one of the main questions any buyer will ask. How much can I really afford? Few people can buy their home outright and will of course, need to arrange a mortgage.
Anyone over the age of 18 can apply for a mortgage. Typically, you’ll be able to borrow up to three times your annual salary. So, if there are two of you applying, you’ll be eligible to borrow more. Add your deposit to this price and you’ll know the maximum you can offer on a property.
Here are a few tips for working out how much you can realistically afford on your mortgage:
As discussed previously, banks will typically offer a mortgage for 90% of the property – meaning you need to stump up the other 10%. Gone are the days when you could get a 100% mortgage.
The larger deposit you’re able to save, the better interest rates you’ll likely be entitled to. This can also help avoid negative equity – whereby the house is valued less than your mortgage.
When it comes to a mortgage, there are plenty of options for you to consider. However, the basics will remain the same. That is, you will repay the amount borrowed with interest. What sets each mortgage apart is the interest rates applicable, and these vary between banks.
Repayment mortgages work on the following principles:
Interest only mortgages work on the following principles:
Although there won’t be a considerable difference in the total repayments, only with repayment mortgages will you guarantee to pay off the loan.
Both mortgage types can be taken out over a number of years, and this is likely to be between 25 and 40. The shorter the term, the less interest you’ll have to pay.
The key to getting the best mortgage deal and ensuring you’re well prepared for the future, is shopping around. As such, it’s advised to speak to a number of different lenders, visit comparison websites and even have a chat with a mortgage advisor.
Remember, you can get advice and support from:
However, although most mortgage advisors are independent and are there to help you find the best options on the market, there are some things to be aware of:
So, you think you’ve found the right mortgage type. Now it’s time to apply and make sure the lender will accept you. By applying early, you can find out if you’ll be accepted and be in a strong position should you find a property you want to buy.
If you go through a specialist mortgage advisor or visit your local bank branch, you’ll need to bring the following:
During the application, the lender will require a number of your personal details and carry out a credit check.
There are a number of reasons your mortgage application could be rejected. This includes a poor credit rating (because of missed payments, debt or bankruptcy), your salary, employment status, or even problems with the property you’re trying to buy. It’s worth checking your credit score before applying for a mortgage, to avoid wasting your own time.
After the lender has all the details they need, they’ll put these into the system – which will determine if you’re accepted or rejected a mortgage.
If you are rejected a mortgage, you should find out what the reason is and look to address this. You can also contact the Financial Ombudsman Service if you feel you’ve been wrongly treated.
Once your provisional mortgage has been accepted and you know exactly how much budget you have to play with, now’s the time to make an offer. However, how do you go about making an offer for something you fall in love with? Do you risk haggling over the price at the risk of losing the property?
In this section we offer guidance on what to do when it comes to making an offer on your first home.
It doesn’t hurt to bid under a property’s value, because you never know a seller’s circumstances or how quickly they need the sale to go through. Of course, on many occasions the offer will be rejected, but every now and then a cheeky one will be accepted.
But, when is a low offer most likely to be accepted?