Making monthly payments on a new mortgage in the UK is tricky.
While typically borrowers come out ahead on account of lower interest payments, potential buyers need to think hard about everything other than the loan amount – and looking into recent house price rises is a good place to start.
From the moment you commit to a new home deal, remember that mortgage charges including arrangement fees, standard variable rate (SVR) and repayment rates will typically all be taken into account – if you’re getting a payment arrangement only.
And how much do you need to save every month to qualify for a mortgage? After all, to qualify for a 100% mortgage with no upfront fee you’ll need to be able to save a considerable deposit.
As mentioned above, the lowest rate deal will probably cost more in the long run – but you’ll need to decide whether you’re happy living with a higher rate or just paying your lender’s fee and no upfront money at all.
Who can get a mortgage?
Getting a mortgage in the UK is quite common, but not everyone is qualified for a mortgage.
At the moment, around 30% of new mortgages being taken out are for people with less than a 10% deposit – but what it boils down to is you know what you can afford and whether you’ll be able to deal with monthly payments when you eventually become a homeowner.
If you’re a first-time buyer, and are lucky enough to have enough savings, you’re on your own when it comes to housing finance.
That doesn’t mean there aren’t lenders willing to lend, however – with LendInvest a start up that is currently offering a no fee 100% loan option for first-time buyers looking to gain their first property.
Who can you borrow from?
One of the most important criteria for a lender when lending to potential mortgage borrowers is credit rating.
But what’s a credit rating and how does it work?
First, credit ratings are issued by credit reference agencies, such as Experian or Equifax, who check your financial history and check against their database of British individuals and businesses.
If you don’t provide personal information including bank statements or pay stubs, you won’t have a credit history.
Now, if you want to apply for a loan, you have to provide the credit reference agency with your bank account details, along with the following information:
the date you borrowed your first loan
the date you borrowed your second loan
the date you paid off your first loan
the date you paid off your second loan
By default, the first loan becomes the most important when it comes to a lender, as it will normally remain open for a set period, such as five or seven years, and will be the first debt they record.
The second account can then be added once your good behaviour starts to shift. Your debt load will then be linked to the other loan as a percentage of the total borrow which makes it harder to switch.
Why should I bother looking for a loan?
A new mortgage can help you plan for the future and protect you against major lifestyle changes such as getting married, starting a family or buying your first home.
It could also give you a leg up in the housing market, and, in turn, give you access to cheaper mortgage rates or loans.
How much can I borrow?
In the UK, mortgages can range from £100,000 to over £450,000 depending on your financial requirements.
If you’re looking for your first home, a two or five-year fixed-rate mortgage is ideal.
These rates often bear the same interest rate but they may only come with a fee.
The best high-street lenders also offer lower rates than their high-street competitors – for example, Yorkshire Building Society has a three-year fix at 3.25%, compared to three.25% at Santander.
How much can I save?
If you can afford a higher rate mortgage of say 5%, there will be a number of mortgage products available that could save you money on monthly repayments.