Things to Consider When Getting a Mortgage for the First Time
There’s no doubt about it; it has become increasingly difficult to secure a first-time mortgage in the UK.
The average house price soared to £229,958 in August, for example, with values increasing by 3.7% thanks primarily to a restricted supply of new properties hitting the market.
With the market showcasing such prohibitive conditions, it’s little wonder that the average age of first-time buyers continues to rise in the UK. And conditions are similar in the U.S. In order to help you overcome these challenges, we’ve listed some key considerations that are crucial when looking to buy a home for the first time:
Understand the Relationship between Mortgages and Interest Rates
While we tend to apply for mortgages through independent lenders such as Andrews, the conditions of borrowing are often dictated by the macroeconomic climate.
Not only does the state of the economic climate impact on lending criteria and conditions, for example, but the base interest rate will also directly influence the monthly repayments required. In the case of variable mortgage products, your repayments will rise and fall with the base interest rate, shifting the goalposts with regards to value and affordability.
It’s important that you recognise this when first applying for a mortgage, while also aiming to invest in a property that is well within your predetermined budget.
Take Control of your Credit Score
While mortgages may represent a secured form of lending, you’ll need to have your credit report assessed before being approved for financing.
So before applying, it’s crucial that you take the proactive approach of downloading your credit report and reviewing it in detail, paying particular attention to any outstanding debts, administration errors and your bottom line score.
In some instances, you may need to settle outstanding issues before making an application, whether this involves the repayment of creditors or reducing your total liability.
It’s also important that your credit record showcases positive credit transactions, so it may be worth applying for a low-limit credit card and using this to complete manageable payments on a recurring basis.
Don’t Forget About the Deposit
Saving for a deposit can be tough, especially with banks not passing the base rate increases directly to their customers.
This is unfortunate, as saving a 15% to 20% deposit or down payment for your house can significantly reduce the amount that you need to borrow and ease your financial burden going forward.
By reducing the value of your mortgage, you can minimise interest rates and the overall cost of borrowing. Similarly, you can improve your chances of being approved for a mortgage, as it’s possible to request less capital to complete the purchase.