YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE Buying your first home Buying your first home is an exciting prospect, but figuring out how to get onto the property ladder can feel overwhelming. Whether it’s a Help-to-Buy ISA, Help-to-Buy equity loan or a shared ownership mortgage, there’s plenty out there to help you on your way. Here, we explain all you need to know to help you buy your first home.
Housing schemes for first-time buyers Over recent years there’s been a steady increase in the number of people purchasing their first home. While the financial crisis of 2008 gave way to ‘generation rent’, financing options have responded to the needs of first time buyers in the current climate. These options have helped first time buyers increase by 75% since the year of the recession: There’s a range of government schemes designed to help first-time buyers.
Equally, there’s thousands of mortgages on the market all of which are theoretically available to first-time buyers. Banks and building societies also package specific deals for first-time buyers, which may include incentives such as cashback, low fees or a contribution towards legal costs. MoneySuperMarket/London & Country data, 2017 Should I try Help-to-Buy? Help-to-Buy is a government-backed equity loan scheme designed to help first-time buyers get a foot on the property ladder.
It covers up to 20% of the cost of new-build homes, which means that you’ll only need a 75% mortgage and a 5% cash deposit. For people who don’t have a lot of savings, Help-to-Buy can be a great option. The average loan for Help-to-Buy customers is just below £175,000, while regular customers receive average loans of slightly over £215,000. MoneySuperMarket/London & Country data, 2017 How much can I borrow? It's a good idea to work out roughly how much you can borrow before you go house-hunting.
There is no point in picking your ideal home only to find that it is beyond your financial reach. In the past, lenders traditionally calculated the amount you could borrow as a multiple of your salary. So, you might typically be granted a mortgage of three times your gross annual earnings. But most banks and building societies these days also take into account the ‘affordability’ of the mortgage and will ask for details of your incomings and outgoings before they decide on a figure for how much they are willing to lend.
They will also take into account the potential impact of future interest rate rises. Our mortgage calculator will give you a rough idea as to the amount you should be able to borrow. Fortunately, now is a good time to get a loan. In 2016-17, average loan advances to first-time buyers increased across the board, with buyers aged 40 to 50 and 50+ seeing particularly large increases. People aged 50 and over, for instance, saw their average loans increase from around £107,000 to £161,000.
MoneySuperMarket/London & Country data, 2017 However, your ability to get a mortgage isn't down to your salary and outgoings alone, your credit score is important, too. If you have suffered from bad debts in the past, your application for mortgage finance might be turned down, or you might be charged a higher rate of interest. The importance of saving for a deposit The more you can save up for a deposit, the better mortgage deal you are likely to get.
Not every mortgage lender will offer a loan for 100% of the property’s value, and those deals that are available will carry a higher rate of interest than loans for a lower percentage. This percentage figure will be described as the ‘loan to value’ or LTV More banks and building societies will lend up to 95% of the property's value - a 95% LTV. Here, you will need a minimum deposit of 5%. You will have a wider choice still if you can put down a 10% deposit.
However, the very best rates are reserved for borrowers with a big deposit - if you can put down 40% of the property’s value, you’re likely to get a lower interest rate in return. It therefore makes sense to save as large a deposit as possible because you will have access to a wider range of mortgage products and be able to benefit from more competitive rates. The average deposit for a first-time buyer is substantially lower than it is for those already on the housing ladder, so even if you save up a little bit more, you’ll give yourself a great chance of getting a better rate.
MoneySuperMarket/London & Country data, 2017 Fixing your mortgage rate There are numerous mortgage deals but they broadly fall into two categories - variable rate and fixed rate. Many first-time buyers favour fixed-rate mortgages because they allow them to budget with certainty. With a fixed rate, you know exactly how much you will have to pay out each month, so you don't need to worry about fluctuations in interest rates.
You can usually fix your mortgage for two, three or five years. But some lenders offer long-term fixes of 10 years or more. It's important to think about how long you want to lock yourself into a mortgage for. Most will charge you a penalty - known as an early repayment charge - if you move out of the deal before the end of the fixed term. Therefore, most first-time buyers tend not to go for long-term fixed rate deals because circumstances can change in 10 or even five years.
If you’re on a fixed deal, you’ll need to react when the term comes to an end. You should shop around for another good deal with the same lender, or move your mortgage elsewhere if you find a more attractive offer. The interest rates on fixed rate mortgages tend to be slightly higher than those on the best variable rate deals because you are paying for the security and peace of mind. The lender is essentially charging you extra to cover itself in case rates rise elsewhere.
Remember, variable rates can change at any point but usually do so if the Bank of England puts its base rate up. When that happens, variable rates will probably rise while a fixed rate will remain the same. Our base rate calculator will help you work out how your mortgage repayments would be affected by interest rate fluctuations. Variable mortgages There are three types of variable rate mortgage.
Standard variable rates (SVR) fluctuate at the lender’s discretion - it decides if and when to make an increase or decrease, and by how much. That said, movements will more than likely be triggered by alterations in the Bank of England base rate. Tracker mortgages are directly linked to the Bank of England base rate - so the mortgage rate you pay might be 3% plus whatever the base rate is at the moment.
If the Bank of England puts the base rate up by 0.25%, your mortgage rate will rise by the same amount. The third type is a discounted rate. Discount mortgages are linked to the lender's standard variable rate (SVR), not the Bank of England Base rate. Always make sure you understand how your mortgage works so that you do not pay a premium for a product that you don't need. The cost of your first home There’s no hard-and-fast rule for how much you can expect to pay for your first home, although most first-time buyers pay between £100,000 and £200,000 for their homes.
Of course, location is a big factor when it comes to cost, and average house prices in different areas of the country can vary dramatically. Halifax mortgage data, 2017 Fees for first-time buyer mortgages Don't forget to factor fees into your cost calculations. Most lenders charge an arrangement fee for your mortgage, which could be £1,000 or more. Some also levy a non-refundable booking fee of several hundred pounds.
Also, don't forget the other fees and costs associated with buying a home - you'll have to pay for a survey and for the conveyancing. Then of course, there's the cost of furnishing your first home. Choosing the right mortgage MoneySuperMarket makes it easy for first-time buyers to choose the right mortgage. Whether you have a big deposit or small, want a fixed or a variable rate deal, we compare first-time buyer mortgages from a wide range of lenders so it's one less thing for you to worry about.
What's more, our comparison service is free, independent and online. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGESee Also: Sears Appliance Maintenance Agreement
An equipment is amongst the most important investments you are going to ever make. Appliances are always hefty purchases, and they are just one from the primary aspects of your property. You trust in appliances for every little thing from cooking to cleansing, and particularly thinking of the amount of cash you may be putting forth for it, it only is smart that you would need to be sure you make the most practical invest in.
Dwelling appliances is actually a time period and that is employed extremely popularly right now but exactly what does it stand for? Dwelling appliances stand with the mechanical and electrical goods which might be employed in your own home for that operating of a standard house.
First-time buyer mortgages Choosing a mortgage is daunting, especially if it’s your first one. But there’s no need to be anxious - we’ve put together advice on what to consider and how to find the best one for you. Mortgage basics A mortgage is a loan taken out to buy land or property, and the amount you borrow, plus interest, is typically paid pack over 25 years (this is the term of the mortgage) – although it can be shorter or longer.
As with any other type of loan, you pay it back every month with interest until the amount has been paid back in full. When you search for mortgages, a phrase that will crop up is ‘loan to value ratio’ (LTV) – this is the amount you’re borrowing compared to the overall cost of the property. So, for example, if you have a £20,000 deposit for a £200,000 home, then your LTV is 90%. As a general rule, the lower the LTV, the better the mortgage deal you might be offered.
What is a first-time buyer mortgage? Many lenders have mortgages aimed specifically at first-time buyers. They often include deals and incentives, such as cashback or a higher LTV (which means your deposit will be lower), with the aim of helping you to get on the housing ladder (and to tempt you to do it with them). First-time buyer mortgages tend to share all the other features of a typical mortgage, so you’ll have a loan to value ratio, a mortgage term (the length of the mortgage), and you’ll need to pay back your mortgage every month.
What’s the difference between repayment and interest-only mortgages? A repayment mortgage is where you pay both the capital (the amount you initially borrowed) and the interest. It means that by the time your mortgage ends, you should have paid off the total loan. An interest-only mortgage is where you only pay off the interest each month and the capital sum remains untouched. So, at the end of your mortgage term, you still owe the provider the original cost of the property and you’ll need to show how you intend to pay that back.
Since the financial crash of 2008, this type of mortgage is rarely offered. What’s the difference between a fixed and variable rate mortgage? You’ll also need to decide whether or not you want a fixed or variable rate mortgage. A fixed-rate mortgage is as it sounds: the interest rate payable on your mortgage will be fixed for an agreed length of time. This is typically for two or three years, but you can find fixed rate mortgages for five or ten years.
When your fixed rate term comes to an end, you will normally move to the bank’s standard variable rate (SVR) but, often, the better option is to search for another mortgage deal. Variable rate mortgages, on the other hand, have interest rates that fluctuate. Standard variable rate mortgages (often shortened to SVR) is a provider’s basic rate of interest – they don’t come with discounts or reduced interest rates, and the provider can change the interest rate.
As mentioned previously, this tends to be the rate you roll onto once a fixed deal is over. Tracker mortgages offer variable interest rates using the Bank of England base rate and ‘track’ a certain percentage above or below the base rate Tracker rates can be for a fixed term or you can have a lifetime tracker, where the rate will be tracked for the entire mortgage term. A discount rate mortgage (another type of variable mortgage) reduces a lender’s SVR by a set amount.
For example, if the SVR is 4% and the discount is 1%, you’ll be charged an interest rate of 3%. Discount rate mortgages are still subject to change though – it’s just the discount amount that is fixed – so if the SVR increases to 5%, you’ll pay 4%. With a capped mortgage, the interest rate is linked to the lender’s SVR but it won’t go above a set level, while a collared mortgage is where interest rate won’t fall below a set limit.
These are much less common but do exist. Should I consider a longer-term mortgage? While the standard length (or term) of a mortgage is 25 years, it can be longer or shorter. Because of the rise in house prices, an increasing number of mortgage providers are offering longer-term mortgages, some up to 35 years in length. And many first-time buyers are opting for these because it lowers the amount you need to pay each month, spreading the cost over a longer period of time If you’re considering taking out a longer-term mortgage, be aware that while your monthly repayments will be lower, you’ll be paying back a lot more in interest.
And think about how old you’ll be when your mortgage term comes to an end. Will you be happy paying off a mortgage at that age? And are you likely to still be working and have enough income to afford the monthly payment? It’s worth checking whether a mortgage deal allows you to overpay without incurring penalties. This will give you the flexibility to pay extra each month should you have a pay rise, or even pay off a lump sum if you come into some money.
This could help you to shorten the length of the mortgage and save on interest. How much can I borrow as a first-time buyer? As with any other form of borrowing, it depends on a number of factors. Lenders will take into account your credit rating and history, your income and outgoings, and how much you have as a deposit. They’ll also need to factor in other influences, such as how an increase in interest rates might affect your ability to pay back your mortgage.
A mortgage provider will consider all these factors when deciding whether they want to offer you a mortgage and, if so, how much you can borrow. What mortgage is right for me as a first-time buyer? There are pros and cons for all types of mortgages; the right one for you depends on your circumstances. Tracker mortgages, for example, typically have the lowest interest rates available, but the rates can fluctuate and increase, impacting your monthly payments, which probably isn’t the right option for you if you’re working to a set budget each month.
On the other hand, a fixed rate mortgage will give you stability because the interest rate remains static. However, if the base rate does go down (meaning monthly mortgage payments could come down if you’re on a tracker), you won’t benefit from any reductions as you might with a variable mortgage. Choosing a first-time buyer mortgage We’ve tried to make searching for a mortgage as easy as possible.
Compare mortgages with us and we’ll ask whether you want a repayment or interest-only mortgage, how much the property costs and how much deposit you have. We’ll do all the searching for you and give you a list of results in ascending order of interest rate. If you prefer to talk about your options, then call the experts at moneyQuest Mortgage Brokers on 0141 243 5633 – they’ll be more than happy to help.