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In our experience, First Time Buyers often rush into a mortgage sometimes without sufficient advice to help them make the best choice. Today’s mortgage market is highly competitive with thousands of different products available from hundreds of providers all after your business. But choosing the right mortgage is difficult - even for a seasoned house owner, never mind a First Time Mortgage buyer!
We know there will be lots of small print to read but don’t cut any corners - read all of it before applying for a mortgage! The following represents just some of the things to look out for.
Borrowing Limits.
The total amount you can borrow will depend on your income. Usually lenders use multiples of 3 times the gross salary of a single borrower. A couple usually can get 3.25 times their main income plus one times their second income. Some lenders will allow you to take 2.5 times your combined income.
Sometimes, if you are in a professional occupation or have exceptionally good employment prospects, the lender will significantly increase the income multiple.
Loan To Value.
Most mortgage lenders offer up to 90% loan to value. That means that they will loan you up to 90% of the properties value. First time buyers often find this particularly difficult as they then need to save 10% of the value of the house before they can buy. With average house prices in excess of £150,000 that’s a lot of money.
However, subject to your income, many lenders will now provide 100% mortgages for First Time Buyers. In fact in certain circumstances some will even lend 110% !
Stamp Duty.
You also have to pay stamp duty.
Up to £120,000 nil
£120,001 to £250,000 1%
£250,001 to £500,000 3%
Over £500,000 4%
Information correct as at 1st May 2005
Surveys, Legal fees, Arrangement Fees and
other costs.
You will have to pay for the survey of the house you want to buy, its
valuation and the solicitor’s fees. All of these add to the cost
of buying your home. Check with your mortgage adviser as some lenders
will allow you to add these costs to the mortgage others will give you
special offer rates and some will throw them in free of charge!
Mortgage Indemnity Guarantee.
A mortgage indemnity guarantee is an insurance policy taken out by your
lender for their sole benefit. The lenders usually insist on these guarantees
if you have borrowed more than 75% of the value of your home. The guarantee
protects them against any financial losses if your house is resold at
less than the value of the outstanding mortgage and you are unable to
repay the balance. It does not protect you – only the lender! It
is important to realise that if you are in a negative equity situation
and owe your lender the balance of the mortgage, you are still required
to pay the money back whether or not the lender has the benefit of a mortgage
indemnity guarantee.
Mortgage Indemnity Guarantees can add several thousands of pounds to the
cost of buying your mortgage.
If you are a First Time Buyer, you should talk to a professional mortgage
broker. Ask for a quote today and a Mortgage Adviser will call you with
the next 24 hours.