Getting on the property ladder is still a common aspiration for a lot of young people, even if it’s getting harder and harder to actually do it. If you save hard and make it a priority though, you should be able to get there eventually.
When you feel like you’re in the position to move out of your parents house or stop renting, you’ll probably start thinking about mortgages. Here’s what you’ll need to know, and some of the things you’ll need to think about, before getting a mortgage.
Think About if a Mortgage is Definitely the Right Way to Go
The first thing to ask yourself when thinking about buying a home is whether you should get a mortgage at all. It’s not the best option for everyone. You’ll need to provide proof of earnings to make sure you can keep up with the payments. But you should also ask yourself how much of your earnings you want to be paying to a mortgage lender.
Some people will be lucky enough to be able to pay for the house outright. If this option is available, it should always be taken. If you have family members willing to lend you money, this is also preferable to borrowing money from elsewhere.
Finding the Right Lender
Mortgage lenders will no longer give out mortgages to anyone and everyone. The credit crunch put an end to that. The sector is competitive and strict nowadays, so it is definitely worth shopping around for the best deal.
Make sure you use a reputable lender though. They should get appraisal from an Appraisal Management Company, this guarantees a level of independence. A lot of lenders will fire a load of jargon at you and give you the hard sell. Don’t fall for this though, take your time and talk to an independent broker if necessary.
Fixed Rate or Variable Rate?
If you don’t know the difference between a fixed rate mortgage and a variable rate one, it’s about time you found out. Variable rate and tracker mortgages will change their rates depending on the changes in interest rates. Some will start out fixed before moving onto variable after an introductory period.
Fixed rate mortgages do as you’d expect; they keep the rate fixed for a certain amount of time. Most deals will move to a variable rate after a certain amount of time, but that could be decades down the line.
How Much Can You Afford to Spend on the Deposit?
The amount you pay on your deposit will obviously depend on how much money you can afford to part with at the time of the sale. Don’t be tricked into thinking that paying the least amount possible is a good thing though.
The size of your deposit will affect the amount of money a lender will allow you to borrow from them. It will also affect what interest rate you’ll be able to borrow at. So, remember, the bigger the deposit, the better!
Don’t Forget the Other Fees
There are lots of fees involved in house buying; it’s not just the house you end up paying for. There’s the cost of a survey, stamp duty and lawyers costs. These things add up quickly so make sure you work out how much it’s going to cost before you jump in.