Mortgage Tips – Know the Basics

Mortgage Tips – Know the Basics

Every now and again you may think about life after uni and what you’re going to spend all your lovely wages on. For many, it is an adjustment going from the poor life of a student to a working man/woman. You might be considering buying your first home but are completely baffled as to where to start. It is essential that you know all the correct information when making such an important decision and as such we are giving you the basics of everything we think you need to know.

Who can apply for a mortgage?
Typically, to qualify for a mortgage in the UK you need to be:

  • 18 years old+
  • A UK resident
  • Planning on living in the property yourself
  • Able to provide the bank/building society evidence of all types of income

You must not have:

  • Had a home repossessed
  • Declared bankruptcy

Can you afford a mortgage?
First and foremost, be realistic! Make sure that you have calculated how much money you can put towards a mortgage. Most mortgage lenders will need a deposit, typically ranging from 5% upwards of the total value of the property you are buying. Then you need to take into consideration not only how much money you need to live (don’t forget about all your bills and money for social activities) but your month repayments as well. It’s also always wise to save for a rainy day fund.

Different types of mortgages
If you have decided that a mortgage is the right step for you the next thing you need to consider is the type of mortgage you are wanting. There are two main types:

Fixed Rate
The amount that you are charged stays the same for a set period of time, for example 2,3, 5 or 10 years. One of the main advantages to this type of mortgage is that you have a set amount each month that you will owe. This could help you budget for future events.

Variable rate
The amount that you are charged can change. This may be more beneficial for people whose income changes month by month as you are able to overpay or leave the mortgage at any time.

The next step
When you are ready to take things that step further it is a good idea for you to do your research. Make sure that you compare what different providers are offering. Many banks and building societies have mortgage calculators and tools on their websites which can help you calculate exactly how much you could potentially borrow based on your earnings. Do keep in mind that even if one provider says no another may be interested in your case.

Help to Buy ISA
For those of you who are interested in saving for a house deposit, this might be of interest to you. The government have released a new (as of 2015) ISA specifically targeted towards the public who want to buy their first home.

Anyone over the age of 16 who is interested in buying a house can open a Help to Buy ISA. Don’t forget you must be a first time buyer. The government will add on 25% of how ever much you have accumulated towards a mortgage. The maximum you can invest is £200 a month and the maximum you can claim from the government is £3000. The Help to Buy ISA is available from most banks and building societies so make sure you take advantage of this opportunity. For more information see Help to Buy ISA.