The ultimate dream is to own your home, but have you really thought about how you’re going to go about getting a mortgage?
Before You Apply[/b]
Before you even think about applying for a mortgage, you need to make sure that your finances are looking good. Do an audit on your finances, so you can see where your track record might be letting you down. Carry out a credit check on yourself – the better your rating and the bigger your deposit, the more choice you have when it comes to a mortgage.
While you may be able to afford the mortgage repayments, you should also remember that owning your own home will incur more costs than renting. For instance, you are now responsible for the upkeep of the building, and you’ll need things like building insurance.
Your Deposit[/b]
When it comes to your deposit, the bigger the better. 25 per cent is the ideal deposit as there are many affordable mortgage rates available to you, but a 40 per cent deposit would guarantee the cheapest deals. The Help to Buy Scheme that launched last week allows you to buy a house with only a 5% deposit – another 15% is underwritten by the government.
Remember that buying a house involves fees other than just the buying of the house, such as conveyancing, stamp duty and other costs.
Using a Broker[/b]
A good mortgage broker can be invaluable when it comes to navigating the plethora of mortgages that are on offer. Someone like Your Wealth, who offer advice, as opposed to just information, can make a world of difference. Always check whether they are offering information or advice, as if they are offering advice, then they have a responsibility to find the best one for you.
A broker who offers advice can speed up the process as they will do the leg work when it comes to looking at mortgages, and may even help you fill our paperwork. You also have more rights if your mortgage turns out to be unsuitable.
Only use a broker that is regulated by the Financial Services Authority (FSA); if they are not on the FSA register then they are not authorised to provide financial advice. Remember that you are paying for the service, and therefore are well within your rights to ask them how they get paid. If you can, opt for a broker who charges and upfront fee. If they don’t, they are likely to get paid commission by recommending certain lenders.
Repayments [/b]
There are two different ways to repay your mortgage, capital and interest, and interest only. Capital and interest, or a repayment mortgage, is repaid with the same amount each month until the end of the debt, upon which you own the property outright. An interest only mortgage means that you pay only the interest and not the capital, meaning that at the end of the mortgage term you’ll still owe the lender all the money. These mortgages are becoming more and more difficult to find, especially for first time buyers.
A mortgage is the biggest financial commitment you’ll ever make, so making sure you get it right is important!