First-time buyer
Setting up home for the first time is an incredibly exciting time of life. It can also feel quite daunting because of the financial commitment you will need to make. There are in fact a lot of areas you need to consider which is where a mortgage adviser like myself can be invaluable to you.
Finding the right mortgage for your circumstances is vital. Your ability to pay over a long period of time and safeguarding against any unexpected future events is also important. Like most financial transactions there is a process to follow. So, if you are new to this, I can give you all the information and help you will need.
Affording a mortgage
The first criterion a mortgage lender will consider is whether you can afford a mortgage. Typically, they will look at your income and outgoings. In simple terms how much do you earn on a regular basis, matched against how much you spend on rent, household bills and living expenses.
At this stage the lender will want to understand if you can sustain a regular monthly mortgage payment. But you also need to afford other household bills. All these factors are taken into consideration for affordability.
The lending criteria
Each mortgage provider will have their own set of lending criteria. These are a series of factors that will determine the risk you present to them. They will want to review all your financial arrangements including other loans or credit agreements.
The amount you will pay upfront as a deposit is a key factor. Most mortgage loans are secured against the value of the property. This means in broad terms, the larger your deposit the lower the monthly payment amounts will be. Typically, this is 5% of the house purchase price but it does vary.
Types of mortgage
There are a number of different mortgage products to choose from. That’s another reason to speak to a mortgage adviser. I can look at your individual circumstances and advise on the most suitable solution for your needs. The more common mortgage products include:
Fixed rate
the interest rate is set for a period of usually 2, 3 or 5 years, so you know exactly how much you are paying a month during this time.
Repayment
each month you will pay the interest and capital you have borrowed over a set period of time, typically 25 years.
Interest only
each month you pay the interest only and repay the capital at the end of the mortgage term, usually with money you have saved in another account.
Variable rate
all mortgage lenders have a standard variable rate (SVR) which is subject to change at any time.
Capped rate
this is the same as a variable rate mortgage but capped so it will not go above a specified interest rate.
Discount rate
these are offer a discount on the lenders standard variable rate (SVR) and are subject to rate changes, usually lasting for a period of 2 to 5 years.
Tracker
these will track a specific interest rate, usually the Bank of England base rate, by adding a set percentage on top of that specified rate.
This isn’t an exhaustive list but includes the more common mortgage vehicles. As a first-time buyer you can apply for any of these, but you need to consider what’s most suitable for you. For any solution there are implications for the amount of money you pay each month. But you also need to consider how amounts might change over a period of time.
Insurance cover related to your mortgage
When you take out a mortgage product you are making a large financial commitment. There are a number of insurances related to this which can help safeguard your investment, should the worst happen.
Buildings insurance will cover the bricks and mortar of your property. If something were to happen and you need to rebuild your home, this type of policy will cover the costs. This is often taken out together with contents insurance, which provides insurance for the individual items within your house against loss, damage or theft.
Life Insurance and Critical Illness cover. These are two policies that will cover a worst-case scenario. Life cover will pay off your mortgage should you die before the end of term. Critical illness will cover diagnosis of a life changing condition and your mortgage being paid off.
Some of my clients also look at income protection. This will help cover your monthly mortgage payments if you are unable to work due to redundancy, an accident or illness. Nobody plans for these eventualities, but this type of insurance can provide you with additional peace of mind.
How to take the first step
An initial conversation is a great place to start. This would give you the opportunity to tell me all about your personal circumstances and current financial position. This is a really important first step because I can start to research mortgage products based on this information.
In my experience, many of my clients have more questions than answers. So, I thought it might be helpful to share the most frequently asked questions that clients raise.
What is a mortgage?
How much can I/we afford to borrow?
How much you can borrow will depend on a number of factors. For example, how much you earn, what you spend on a monthly basis and what other financial commitments you have. This is why the initial meeting with a mortgage adviser is so important. We can discuss your circumstances, calculate how much you can borrow and research the most suitable for you. Use our mortgage calculator to give you a quick guide.
How do I go about getting a mortgage?
How do I buy a property?
Can my parents or relatives help me?
Yes, they can and many of my clients have benefited from talking to their family. There are several ways in which they can help, as joint borrowers, acting as a guarantor, even assisting with a deposit.
How long does it take to buy a house?
As a first-time buyer it could be relatively quick, within 4 weeks, if it is a new build house or empty. But there are other factors that can play a part. For example, if the owners of the house you are buying are purchasing another property, they are likely to be in a ‘chain’. This can add time to the house buying process and it can take up to 6 months, sometimes longer depending on the length of the chain. As a mortgage adviser I can help to ensure everything progresses as quickly as possible, constantly liaising with the relevant parties.
How do we save for a property?
What are the upfront costs of purchasing a property?
What is stamp duty?
If I use a mortgage adviser are there fees involved?
Yes there is, for the sort of advice and guidance I provide there is a fee. It is payable when a full mortgage application is submitted, but only after I have researched the right product for you, completed all the administration and liaised with all the relevant third parties on your behalf.
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I can offer you a wide range of mortgage solutions. As a trustworthy, reliable and passionate mortgage adviser, I simply love helping my clients achieve their dreams.