16 January 2015

5 tips before taking out your first mortgage

Is one of your New Year’s resolutions to get on the property ladder? 
If you’re set to be a first-time buyer in 2015, here’s an introduction to house-buying and 5 key things you need to think about before taking out a mortgage.

1. A big deposit could get you a better deal

In order to get a mortgage, you'll need to put down a deposit.
To take advantage of the most competitive deals on the market, you'd normally need a deposit which is at least 25% of the total value of the property you want to buy. If you’re able to raise 40%, you could get an even better deal.
If you can’t raise this amount of money you can sometimes still get a mortgage with as little as 5%. So, if the property you want to buy is £200,000, you'd only need to put down £10,000 to apply for a mortgage.

Struggling to save? There are a number of schemes and incentives aimed at helping first-time buyers onto the property ladder, such as Help To Buy and Nationwide’s Save To Buy. 

2. How much you can afford

You may have your heart set on a five-bedroom mansion house with heated swimming pool, but you need to be realistic about your finances. It's important you don’t take on a bigger mortgage than you can comfortably afford. Drawing up a budget before you start looking for a home will help you know your limitations. You can also use our handy mortgage tools and calculators to find out how much you could borrow, and compare mortgage payments.

There are now even more robust checks when you apply for a mortgage, and lenders will need proof of your income and outgoings to ‘stress test’ your ability to make your monthly repayments in the event interest rates rise.

3. Your credit rating could make a difference

Before applying for a mortgage, check your credit file to make sure all the information is correct and up-to-date. This is what lenders will see when they review your application, and it can affect the types of deal you're offered. If your score isn’t looking too healthy, you could improve it over time by:

  • Ensuring you’re on the electoral roll
  • Cancelling credit cards you no longer use
  • Paying bills and other debts on time

4. There are extra costs involved

When buying a home, it’s not just the deposit and mortgage you need to take into account - there are several other costs you'll need to factor in to your budget. These include:

  • Valuation fees
  • Survey fees
  • Stamp Duty
  • Solicitor’s fees
  • Buildings insurance
Other possible costs...

  • Removal costs
  • Decorating and furnishing
  • Contents insurance
  • Protection policies, such as life assurance and critical illness cover

5. How to find the best deal

With so many different products to choose from, finding a mortgage can be a daunting prospect for first-time buyers.

You may choose to talk to an independent mortgage broker – in which case opt for one that is able to offer advice. Brokers have comprehensive details of mortgages currently on the market.

It’s also worth speaking to your bank or building society directly, as they may offer you exclusive deals if you already have other products with them. Find out about Nationwide's mortgage offers and schemes

THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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