Buying your first property, and obtaining your first mortgage, can be daunting. After all, it is one of the most important financial decisions you will ever take.
As if that isn’t enough to cope with, there is also the current housing boom. Soaring prices have either put people off purchasing a property, or have encouraged them to take out mortgages which are simply not affordable.
So what should a first time buyer do? The best bet it to try to save as much of a deposit as possible. If you are not able to save any, then don’t worry as there are lenders who offer 100% loan to value mortgages. These are, however, generally quite expensive when compared to mortgages where a deposit is paid. Most lenders will require at least a 5% deposit.
You should also avoid the temptation of borrowing more than you can realistically afford. As property prices have rocketed, some lenders now allow you to borrow up to five times your salary. This is not recommended - by borrowing so much, you run the risk of financially over committing yourself and defaulting at some point in the future. Moreover, there is also the chance that you will find yourself with negative equity i.e. where the mortgage is actually greater than the value of your property.
Most lenders will allow you to borrow a more affordable amount. This is usually 3.25 x salary for a single person or 2.5 x joint salaries for couples.
And don’t forget the other costs you may incur. Your lender may require payment of a Higher Lending Charge, especially if you only have a small deposit. Then there are fees as well as the possibility of having to pay stamp duty.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
(1st Time Buyer)
Our rate:
6.39%
Overall cost for comparison is 7.1%
(1st Time Buyer)
Our rate:
6.14%
Overall cost for comparison is 7.1%
(1st Time Buyer)
Our rate:
7.19%
Overall cost for comparison is 7.5%