Mortgage for first time buyers
Considering the high costs that come together with the purchase of a property, taking a mortgage loan is something that many people resort to. The solicitor will therefore pledge to pay back for the loan within a specific amount of time and the contract signed for this purpose will only be dismissed once the initial obligations fulfilled or the property taken through foreclosure.
According to the mortgage UK policies the procedure represents the limitation of the rights that an owner has on his property as a consequence of pledging those rights, as collateral or security, for a loan.
Until a few years ago obtaining a good mortgage deal was considerably easier than nowadays, when the financial crisis and the partial fall of the housing market made things more challenging.
Therefore, first-time buyers, even though allowed to apply for any type of residential mortgage, are currently more severely conditioned by the credit score and the deposit’s value, the two main aspects determining whether one qualifies for the mortgage or not.
While the lowest rates of interest and the widest choices come together with a deposit of minimum 25%, lenders still make offers to solicitors that come with deposits of 10% or even 5%, the last ones obviously providing with less competitive rates and less favorable terms of the contract.
As for the value of the loan, first-time buyers should know that it is normally set somewhere around three times the solicitor’s salary, unless there are indicators making that person a risk customer. And the indicators are analyzed through affordability models that take into consideration both the finances and the expenses of the solicitor, together with his credit history. This would be the procedure that appraisers currently use, as opposed to the old one, which involved granting loans upon salary multiples, with no other considerations.
As a consequence, applying for a mortgage should make the customer ask himself a few questions such as:
How much money can I spend in order to purchase a property?
How much can I invest from the beginning and how much do I need to borrow?
How much can I afford to pay on a monthly base as a mortgage rate?
Do I afford to take the loan on my own or is it better to make it together with other persons or friends?
Finally yet importantly, prior to buying a mortgage, never forget about the extra fees involved, besides the purchasing price and the deposit, such as: the legal buying fees, the valuation of the property, the survey fee, the disbursement fee, the stamp duty land tax, the mortgage product and mortgage account fees, the removal costs, the 10% contingency and the building’s insurance.
Ignoring all, or part from the entire above often causes difficulties to the borrowers, so analyzing the offers of numerous service providers and reading all the documentation provided is mandatory for first-time house buyers.