For a first time buyer, getting onto the property ladder can be daunting. Whether you’re planning on buying on your own or with a partner, there’s so much to take into consideration – how long you will realistically want to stay in one place, the location, and of course the costs. You can take time to consider the mortgage types available on the market an informed decision when you are adequately prepared.
Mortgages provide the means with which to attain a home, by offering a loan which is secured against the property you have chosen and is repaid in monthly installments. Finding the right mortgage takes some consideration though – here’s what you should be thinking about when you are ready to make a decision on the best mortgage for you.
Getting a mortgage
You may not know where to start if you’ve never applied for a mortgage before, but banks and building societies offer plenty of advice on how to apply. Seek enough information from all your sources including banks and professional mortgage companies, compare their offers, terms of payments, policies on breach of payment etc before you narrow on the best ones to choose from.
If you have a bad credit rating, you could encounter some problems when applying for a loan for mortgage. However, some banks and building societies do offer specialised loans for those with a bad credit rating. Be aware that they will be more expensive than usual, however. A poor credit rating can significantly limit your loan options, so you should take lengths to protect it.
If you are self-employed, you will need to show the lender proof of your income. You can do this by providing your accounts – many lenders will only consider you for a loan after seeing at least a full year’s accounts from you. If your income is not adequate to keep up on repayments, it’s best to wait until you can manage comfortably with the loan.
What are the mortgage types?
Before approaching a lender for a mortgage, it’s a good idea to read up on the kind of mortgages available to you. This guide from Yorkshire Building Society gives details on the different types of mortgages to consider.
Fixed-rate mortgages usually have high interest rates, but are secured for a long period of time and unaffected by rises and falls in prices. They’re better for a long-term situation.
Variable rate mortgages tend to have a low interest rate, but this rate can be affected by the Bank of England Base Rate. They’re usually the cheaper option for short-term loans but can be a little risky.
First time home buyers help
For first time home buyers, a new government scheme put in place to encourage first-time buyers could lend you a helping hand. As reported by the BBC, the Help to Buy scheme will allow first-time buyers to put a 5% deposit on a new home, which is a lot less that what many banks offer.
Getting your first home is a big step – make sure you know what you want and that you’ve got all the advice you need to make an informed choice on mortgage options.