Are you applying for your first mortgage? We know it can be daunting, especially considering the sky-high prices of homes on the market today.
Our Residential Property Team has a few top tips on how to raise the money to pay for your dream home.
We recommended that you start looking at mortgage options before you find somewhere to buy.
It’s always better to have an idea of how much you can spend before you dive into viewing properties you may not be able to afford.
Doing this first means you can assess your borrowing options and stop you rushing through a mortgage application.
Deposit
It makes sense that the more money you have to save for a deposit, the less you will have to pay on your mortgage.
The larger the deposit you can save and secure, the better repayment terms you will be able to achieve.
You will need to be able to show proof of the deposit, for example, a statement of your savings account.
Mortgage in principle
You can ask your chosen lender to provide a mortgage decision in principle.
You may not have found a specific property at this point but this is an offer to loan you money in case you need to move quickly on making an offer.
Once you have found somewhere to buy, let your lender have the details. The time they take to issue your formal mortgage offer will be far less than if you were to start the whole application process at this point.
Online affordability calculator
If you want an idea of how much you could borrow before approaching a lender, you could try this handy tool.
Your credit rating is important to a lender, so it’s vital not to put this at risk, by doing anything like applying for car finance or cancelling a credit card.
If you’ve had a credit card for years and it has been paid off, this can actually be seen as a positive point by the lender.
You can also ask your bank or building society what they would be prepared to offer you as their client or approach a mortgage broker who will lay out all the possibilities.
Once you have decided which lender you would like to use, fill in their application form but don’t make too many applications as lenders will be able to see that several credit checks have been requested. This may put them off giving you a loan.
Help to Buy
Check if you are eligible for a government Help to Buy: Equity Loan.
This is available for first-time buyers who have never owned a home before and who want to buy a newbuild property sold by a Help to Buy-registered homebuilder.
There is a maximum price the property can cost, which varies by region.
You will need to pay a minimum of 5 per cent deposit and arrange a repayment mortgage for at least 25 per cent of the purchase price.
You can then apply to borrow an equity loan for said percentage of the property purchase price. Interest is not payable on the loan for the first five years.
Lifetime ISA
The government offers a Lifetime ISA which can be used towards the purchase of your first home.
You can open an account if you are aged between 18 and 40 and the government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
Need more help? Contact our Residential Property Team now on 01772 799 600.
Article by Jenni Shoreman
