Buying a property is probably one of the most valuable purchases you will ever make. However, unless you are lucky enough to buy a property out right, you will need to borrow a substantial amount of money to buy your home.
Here’s some tips on how to go about doing that.
Most buyers will have to have a mortgage which is basically a long-term loan. This can be obtained through building societies and banks. The lender charges interest on this and gets repaid overtime.
There is a wide range of options and this can be quite confusing since options vary due to such a competitive market.
You should talk to a financial advisor to help you get the best mortgage for you.
There are different types of financial advisors. You have restricted advisors who can only tell you about a limited range of lenders. Then there are the independent financial advisors who can give unbiased advice about a whole range of lenders.
Advisors have to inform you of costs in advance. Some will charge a fee for arranging a mortgage or they get paid by the lender.
This means that different advisors can give you different deals but they all must be impartial and registered with the financial conduct authority.
How much can you borrow
There are various factors that affect how much you can borrow, there are some online calculators, but they are not always exact.
It comes down to your personal circumstances and the property you want to buy. You should try to think of it as the maximum you want to borrow is 4 times your salary. However, this is a general multiplier and the amount you actually get could be very different.
What can you afford?
A mortgage is a long-term commitment that you will be paying off every month for years.
When you apply for mortgage with a lender, they will want to know lots of details about you like, how much you earn, savings and outgoings. This is so they can see if they can trust you with their money.
To prepare you should make list of all your outgoings, gym memberships, fuel costs, childcare etc. Also, any savings and debts you may have.
You have to place a deposit, chances are you cannot borrow more than 95% of the purchase price of a property, so you will need at least 5% in your savings to make up the difference.
The interest rate on your mortgage is less the more you pay on your deposit.
Aim for about 10% this will give you more lower mortgages. You will need at least 40% for the lowest possible rates.
Type of mortgage
There different types of mortgages. A standard Variable Rate has an interest rate that is set by your lender, this can go up and down during the life of the mortgage. A tracker mortgage will follow movement in the bank base rate which is set by the Bank of England.
A fixed rate mortgage is a set rate of interest on your mortgage for a certain amount of time, usually between 2-10 years. Once this expires the mortgage will revert to standard variable rate.
There is the interest only mortgages, these are only for specific circumstances and are not really suitable for owner-occupier buyers.
Start the process
It takes ages for an application to go through, so whilst you are looking at properties having a clear picture of your financial ability is a good idea.
Ideally you should get an Agreement in Principle from a lender, this confirms how much they will be prepared to lend you on a suitable property. Estate Agents will take you seriously with this and aim to show you homes that meet your criteria.
Buying a new home can be really stressful and expensive but if you prepare early enough and have all the information then it should make things easier.
If you are looking to purchase a property, you can view our current listings here.