Getting a mortgage can be daunting if you’ve never done it before but the good news is that there are people out there who can help so that you avoid the worst of the pitfalls. Here, Anderson Harris suggests a few key points that you may not have thought about:
- Begin with a conversation with an independent mortgage broker to find out how much you can realistically borrow, before you start your property search. A ‘decision in principle’ from a lender, setting out how much it is prepared to lend you, is a useful tool and will convince agents and vendors that you are serious because you have checked out how much you can borrow beforehand.
- Buy for the long term. Buying and selling are expensive so considering properties that you can stay in for slightly longer could save you money. We had a client who bought a one-bed flat a year ago because she was desperate to get on the housing ladder and it was all she could afford. However, now she is pregnant and needs more space but the property hasn’t gone up in value and there are early repayment charges on the mortgage so it’s going to cost a lot for her to move.
- Avoid the temptation to overstretch yourself and borrow more than you can really afford. Mortgage rates are low and while lenders stress-test the loan against a higher rate to protect against rate rises, a sharp increase in the rate you’re paying when you’ve already maxed out your borrowing potential would come as a shock when it’s time to remortgage. Borrowers tend to stretch themselves to the limit but that’s not a good idea.
- Get to grips with the legal side – understand the limitations of a leasehold and shorter leases, and what they mean. There is a reason why those types of property tend to be cheaper.
- Be aware that lenders can be more reluctant to lend on certain properties, such as studio flats. flats above commercial premises, certain construction types, and ex-local authority property. Even if you really like it and you can find a mortgage to buy it, think about how easy it will be to sell on again in the future.
- Make sure you have enough of a credit file for banks to see evidence that you are paying your debts in full every month. You may think it’s in your favour not to have a credit card but if you have one, and pay off the balance in full every month, this will better demonstrate to a lender that you are a responsible borrower.’