Many people wait to arrange their mortgage until they have found a suitable property. However investigating your financial options sooner rather than later may help during the negotiating stage. Greenaway Residential Estate Agents cover all aspects of property sales including mortgages and covers a wide area around Crawley, including Horley, East Grinstead, Haywards Heath and Burgess Hill.
You will be in a stronger position as a serious buyer if you already have finance behind you. If you haven’t arranged your mortgage you may be disappointed if you have found the ideal dream home and the mortgage lenders have changed their lending criteria. The financial world is constantly changing and you need to secure your financial position as early as possible in the process.
Whether you need advice on setting up a mortgage linked to a property move, or you want to find a better deal on your existing mortgage Greenaway Residential can provide you with an efficient and professional service. Our independent financial adviser will help you select the most cost effective mortgage from the whole of the market to suit your individual circumstances. Contact us now to discuss how we can help you.
Need A General Guide On Mortgages?
So you’ve decided to buy your first home but you don’t know where to even begin. One of the biggest things to consider when buying a home and probably the most important, is the mortgage itself. You should do some research into how much you can afford. There are many good calculators online which take into account your income and how can calculate the size mortgage you can have.
As a general rule, your mortgage should not be more than 3 times greater than your annual income so for example if you have an annual income of £30,000 then you should look at applying for a mortgage of around £90,000. However, don’t forget if you are planning to buy a home with someone, both incomes are looked at.
If you are not fortunate enough to have large amounts of money, then you may well have decided to save up the deposit for a potential home.
Usually this can be anything between 5 and 10%, so for example, if a house is on the market for £100,000, you would have to pay the first £5-10,00 to a mortgage lender. The more money you pay though, the shorter the mortgage, or alternately you can chose to have lower payments over a slightly longer period.
All things considered, it is well worth checking out as many mortgage providers as possible, as each one has their own advantages and disadvantages. Some companies will offer small incentives to help you save for your deposit. But be careful. It may look like a good deal, but you should do your research first.
There are many different mortgage terms out there which might make things confusing, here is a guide to what you might see or hear when applying for a mortgage. It is up to you to choose what suits you best. However do not feel pressured into choosing one when you are still unsure of the details. If you need to think it over, tell the mortgage providers you would like to do so.
- Fixed rate mortgage – The interest remains the same throughout a period of 1-10 years. This is good because you will know exactly how much your mortgage will cost over a fixed amount of time. However whilst this may look good, if interest rates fall you will not be able to take advantage of this and will have to continue paying a fixed rate, which means you could end up paying more than you would with a regular mortgage.
- Tracker mortgage – This is linked to the bank of England base rate. If these rates change, your mortgage will change. This could mean either your payments go up or they could even go down.
- Offset mortgage- this is quite a complicated way of paying your mortgage. Any savings you have are linked to your mortgage debt. This means you pay less interest. If you have savings of £20,000 and a £100,000 mortgage, you would only pay interest on £80,000. However your repayments will be made as if you are paying off a £100,000 mortgage, so you end up paying more than you need to pay. However this can be good as it means you pay your mortgage quicker and therefore save a lot of money on interest.
There are also a few alternative routes to go down when looking at buying a new home.
Help to Buy
As the current housing market has been extortionate the past few years, the government has implemented a scheme called help to buy. This means that people, who were originally priced out of the housing market, now have a good chance to own a home. It makes the housing market fairer and also stabilises house prices. There are a few different help to buy schemes, each with good points and bad points.
The first option is what is known as the equity loan. This scheme is available to first time buyers, but the max value is £600,000. What you need to consider with this option though, is that you cannot rent out the property. You must live there.
So with an equity loan, you pay at least 5% of the total price. The government then gives you a loan at a much lower interest rate of up to 20% of the total house price. You must then get a mortgage for the remaining 75%. This is good because a lot of mortgage companies are more willing to provide mortgages that cost less.
One key feature to consider is that with an equity loan, you won’t be charged any loan fees for the first 5 years. After the 6th year you will be charged 1.75% of the loans value.
In addition to this, the person who helped you to set up the agreement will contact you before the fees start so you can set up a payment plan to suit your needs.
A word of warning however, these fees do not contribute to the repayment of the equity loan, so you do have to be careful.
Another thing to consider is that your choice of homes is limited to only being able to buy one that was built by a registered help to buy builder.
You must also have finished repaying the loan within 25 years.
You can pay back as much as you like, including all of it at any time within those 25 years though.
Another similar route is known as the Mortgage guarantees. Again with this method you pay a deposit of 5%. However this scheme only requires this amount. No more, no less. So if you can afford to pay a higher deposit then this might not be the best choice for you. This scheme is open to first time buyers for both new builds and older houses. Again the maximum price is £600,000
Once you have found a mortgage provider, and you have paid the initial 5%, the government will provide a guarantee to the mortgage lender for up to a further 15%. This makes the banks and building societies more willing to lend larger mortgages with lower rates of interests, as they are guaranteed some form of payback.
You do not have to do anything, as the government and lender will do everything for you. The only thing you need to do is sign a declaration. As with the first help to buy scheme, you cannot rent the property out.
Plus if you are considering the option of shared ownership, then a mortgage guarantee is not possible. Your credit score will also be subject to checks just like a normal mortgage application. You may still be turned down by some lenders, whilst others will be happy to lend you money.
In addition to this, you will need to provide proof that you can afford the repayments.
Shared ownerships are ideal if you already live in a house owned by a housing association. You buy a share of your home; however this is usually a fairly large percentage, usually between 25 and 75%. You then pay rent on the remaining share. You will need to take out a mortgage to pay for your share of the purchase price. This means you may end up paying both a mortgage and rental payments. This could become quite expensive. However, generally speaking, houses in housing associations tend to be much cheaper than other houses.
There are however strict conditions to become eligible for this scheme. Your household income must be less than £60,000 a year; although this is slightly higher in London this is to accommodate the living costs as they are much higher in London than anywhere else in the U.K. You must also be a first time buyer.
When you own 100% of your home, it is important to be aware of the fact that, if you decide to sell, the housing association has the right to buy the house back first. This is called first refusal, and the housing association can do this for up to 21 years after you own your home outright. So this option might only be worthwhile if you plan to stay there for a very long time.
Another downside is, if you only own a share of your home, and you do not make a good effort towards buying more of the home, the housing association is legally allowed to find a buyer for it, regardless of whether you want to sell or not.
Finding the Right Home
Now that you have had a look at the mortgage options available to you, the next thing is choosing the right home. There are many things to consider. The reality is, you may not find the perfect home, but you can find something that suits your needs without having to make too many compromises.
The key thing to remember is though, only go through with a sale if you are 100% happy. Most homes will need work doing, and you have to factor in those costs along with the mortgage itself.
You will need to hire a surveyor; to assess the current state of the property and this can only be done after you have put an offer in for the house. If the surveyor finds anything working with the house, it is up to you whether you think it is worth fixing or not. If you decide that the cost is not economical and you have been put off by the repairs needed, you can withdraw your offer on the house. You will not get your money back from the surveyor though. And you should be aware that you will have to hire one each time you put an offer in for a house. This is a legal requirement as a surveyor is there to make sure the building is structurally safe to live in.
As a first time buyer, you are most likely going to be using an estate agent to help you find a home. Shop around to get the best deals. Whilst all estate agents have fees, some are much higher than others. You should ask around and see what experience others have with the agents you are considering.
One of the benefits of going to an agent is that they should have various properties for you to look at that fit your criteria. They can also help you choose what area you would like to live in as they can tell you area statistics and can give you information about local amenities that might be hard to find out by yourself.
You don’t have to go through an estate agent though, you can go privately, which could save on the mortgage fees but you have to be careful that the seller is trustworthy and that you get receipts for absolutely everything.
Once you have found a home and are happy with it, you must then agree on a date for exchange of contracts, set a completion date of when you want to be moved in by. This will take some time as a lot of paperwork has to happen and if any work needs doing before you can move in, this will also delay the moving process.
You must also make sure you arrange for building insurance to start as soon as contracts have exchanged. Not only is it a legal requirement, but it also means you won’t be left out of pocket if something unfortunate was to happen during the moving process.
You can also arrange for contents insurance. This isn’t compulsory, but is definitely something to think about.
You must also remember to get into contact with a utility supplier to set up an account for the new home. It would be silly if you did everything perfectly and moved into your new home, only to find you lack a gas, water and electricity supply!
Any other bills you currently pay, such as phone bills and TV packages should also be notified of your moving date so they can update your details and you can continue to pay as normal.
The last thing to do, but probably the most exciting, is to tell your friends and family your new address!
With that out of the way you can finally relax knowing that you did your research, and managed to get yourself on the first step of the property ladder. You are over the hardest part!