When you’ve made the decision to buy a home, whether it’s your first home or your third, let’s not beat about the bush - it’s a big decision (not to mention a very exciting one!). Before you even get to the viewing stage, you’ll need to be thinking about getting your mortgage sorted.
Choosing the right mortgage is crucial - but it can be a bit overwhelming, especially if you’re new to the property game. Read on for our guide on how to make sure you choose the mortgage that’s right for you - then you can get on with the fun stuff!
What’s in a name - your guide to mortgage terminology
Understanding mortgage jargon and terminology will go a long way to helping you when you start looking at the (literally) thousands of mortgages available out there. Warning: Mortgage Confusion is common amongst first-time buyers - but it doesn’t have to be! It’s worth taking a little time to go through these and get comfortable with the lingo before you make any applications - trust us, you’ll be talking the talk in no time:
This means your monthly mortgage payments will remain the same, often for the first 2-5 years. For the remaining 25-30 years, they change to a variable rate, unless you pay off that mortgage and take out a new one with another lender.
This means your monthly mortgage payments may change depending on whether the Bank of England base rate goes up or down.
Bank of England Base Rate:
A rate of interest that mortgage lenders’ variable rates usually follow. Goes up or down depending on the UK economy.
If your circumstances change, your mortgage should take account of that. Most mortgages allow you to overpay by 10% per year if your finances are improving.
If your circumstances change for the worse, your mortgage may allow for underpayments.
Find a mortgage that suits you
To submit an offer for a property, you need to have a “mortgage in principle”, which is a confirmation from a lender that they will grant you a mortgage. How do you get a “mortgage in principle”? Good question! You’ve got three options:
Make an appointment to go and see your bank.
The drawback here is that you’ll only be offered the rates and deals the bank provides, meaning you’ll potentially be missing out on competing rates and deals from other lenders. When following this route, you need to ask yourself if what’s on the table is really the best fit for you and your circumstances.
Make an appointment with your parents to go and see their bank.
The advantage of this route is that you may be able to access a 100% mortgage -with your parents acting as guarantors. However, in the event that you struggle to pay your mortgage, they’ll be liable, and the lender will look to them to meet the repayments. Again, you need to ask yourself if what you’re being offered is appropriate for your needs (and your parents!) as you’ll still only be offered the rates and deals offered by that bank.
Therefore, we’d recommend that you…
Make an appointment to go and see an independent mortgage broker.
Mortgage brokers, or at least good mortgage brokers, will meet you and spend roughly an hour and a half getting to know your circumstances, earnings and spendings. From there, they’ll research the whole mortgage market for suitable rates and deals that best match what you can comfortably afford to pay every month - without having to live on baked beans for the next 20 years. They’ll then present your options, talk you through them and help you to reach the right decision.
Whatever option you choose, once you decide which rate and deal suits you, you should obtain a “mortgage in principle” letter from your chosen lender which will allow you to submit an offer for a property.
The bigger your deposit, the better
Most mortgage lenders would like to see you make a good deposit - the larger the deposit you can make, the wider the choice of mortgages. Generally speaking, most lenders keep their best rates for those property hunters with the biggest deposits. What’s more, you’ll be making lower monthly payments, because you’ll get a better deal. Long and short - start saving as early as you can, and for as long as you can. Your lender will thank you!
Boost your credit rating
This part is really important when you’re trying to secure a mortgage. Put simply, if you’ve forgotten to pay a mobile bill or have found yourself in trouble for missing other bill payments in the past, your credit rating can suffer - and this will impact on the mortgage The credit score you need to get a mortgage differs from provider to provider because there’s no one score fits all. However, if you’ve got a good credit score from any of the main reporting agencies (Experian, Equifax), then you’re far more likely to have a good score with your chosen lender. you are likely to have a good credit score with your lender. You can check your credit rating for free by using the search term “credit check for free”, though most credit checks are free for 30 days (be careful - if they’re not cancelled before the end of the 30 day period, you’ll be charged a monthly fee until you cancel!) If you find you need to improve your credit score, it’s worth doing so before you make your mortgage application so that you secure the best deal.
Try to clear as many outstanding debts as you can
Most prospective lenders want to see as little debt as possible. Lots of monthly payments on outstanding loans, credit cards and purchases isn’t a good sign, as far as they’re concerned, so it makes sense to reduce outstanding debts as much as you can and demonstrating that you’re good at financial management. Low debt means you’re far more likely to get the mortgage you want - but it also means that should you need to, you’ll be able to borrow more when it comes to the lender’s affordability calculations.
Avoid chopping and changing your applications!
Once you’ve made the decision on which mortgage to plump for, don’t start chopping and changing the figures as it could delay the purchase. If you start messing around with the figures once your application is underway, it’s likely your offer will be reassessed, adding delays to the whole process. Better to have clarity around everything before you commit, then stick with it!
And that’s it - our super-quick guide to finding and securing your mortgage! Don’t forget, whichever path you take, monitoring your mortgage is an ongoing job - it needs to be managed, just like every other aspect of life. In the meantime, it’s time to crack on with the house-hunt - and don’t forget, we can do some of the hard work for you. Happy Hunting!