How to get your first mortgage
If you are planning to buy your first home, one of the main things you will need to consider is how to go about getting your first mortgage. Unless you are fortunate enough to have access to significant sums of money, almost all buyers will need a mortgage. The range of mortgage deals on the market can be bewildering, even for a veteran already on the housing ladder, so many first time buyers will be best advised to consult a mortgage advisor before applying for their mortgage.
What is a mortgage?
A mortgage is a type of loan. The mortgage company lends you money to buy your home which you pay back in instalments. The lender is protected by a charge, on the property. If you do not pay the instalments, the lender can ultimately take possession of your home and sell it to recover the money which is due.
Most mortgages are now repayment mortgages. This means that each month, you pay back a small portion of the money you have borrowed plus interest on the remaining sum outstanding. At the end of the mortgage term, if you have kept up with the repayment schedule, you will have paid back all of the money you borrowed and the interest which is due on it.
What do I need to consider before applying for a mortgage?
Firstly, you need to consider how you will fund your deposit. This will help to determine how much you can afford to pay for a property and different lenders will have different requirements as to the proportion of the property value you can borrow.
Any mortgage lender will need to establish that you are able to afford the repayments on your loan. To do this they will look at your income and outgoings. You can help prepare for this process by gathering together your bank statements and pay slips if you are employed. If you are self-employed the lender will require your business accounts and details of tax paid as well as your bank statements.
The lender will look at your salary or base income, together with income from any pensions and investments and any additional earnings from bonuses, a second job, commission or freelance work.
You will need to provide full details of all of your outgoings, including repayments on credit cards, insurance, utility bills (gas, water, electricity, phone, broadband etc.) and maintenance payments. Your lender may also ask you for estimated living costs, particularly if you are currently living with family. The lender will take into account items such as entertainment, food, childcare and recreation.
It is sensible to check your credit file and correct any inaccuracies on the report. If you have existing debts, it is a good idea to pay these off as far as possible and ensure that you have kept up to date with repayments.
What about planning for the future?
You will need to plan ahead to make sure that you will always be able to meet the mortgage repayments. Building up your savings is wise because then you can use your savings record to demonstrate to lenders that you are able to pay if your circumstances change. Three months’ outgoings, including mortgage payments, is a good amount to aim for.
When the lender assesses what level of monthly payments you can afford, this is known as the affordability assessment. The lender also carries out a mortgage ‘stress test’, checking that you can continue to meet monthly payments if your circumstances change in the future which could impact your ability to repay a mortgage. These circumstances could include, for example, interest rates rising, you or your partner losing your job, illness, career breaks or having a child.
Interest rates rising by even a small amount can cause a big increase in monthly repayments so it is important that you consider how you will meet repayments if interest rates do rise.
As a result of the affordability assessment and stress test, the lender may decide you cannot afford the mortgage and reject your application. Alternatively, the lender might offer you a mortgage but for less than the amount you applied for.
How do I apply for a mortgage?
It is important for all buyers to choose the right mortgage and using a mortgage advisor can help you do this. Mortgage advisors are specialists with expert knowledge of the market who can help you find a mortgage that reflects your needs and circumstances.
When you are buying your first property and taking out your first mortgage, it is particularly important to get expert advice because your experience with mortgages is going to be less than someone with prior experience of buying property.
Using a mortgage advisor to apply for a mortgage can help avoid unnecessary rejections. A mortgage advisor will analyse your preferred mortgage deal before you apply and give you clear advice as to whether it is the best choice for you. They will be much better placed to understand any restrictions on the loan and whether it fits your circumstances.
The earlier you consult a mortgage advisor in your house buying journey, the better. Consulting a mortgage at the outset will mean that you are in the best position possible when you start to view properties.
How can OneDome help?
At OneDome, we have a team of talented mortgage experts with years of experience helping people make the right mortgage decisions. If you have any questions about the mortgage process, our advisors will be more than happy to help; simply get in touch with us on 020 3868 6262 today.
We also provide Mortgage Passport, our online mortgage tool, makes it simple to find out how much you can borrow. With the Mortgage Passport, you can find out how much you could borrow in just five minutes, as well as pre-qualify for a Mortgage in Principle. This will help you stand out from anyone else also trying to buy your dream property and increase your chances of being successful in the search for your new home. You can also browse over 12,000 mortgage products from 90+ lenders.
OneDome does more than just get you a mortgage though. As the UK’s first website capable of connecting the entire property journey, we also help you find or sell a home, connect with estate agents, and complete your conveyancing, all online and in one place.