Meryn Stewart, mortgage adviser with Tru Wealth gives Moneysucks readers her views on the best way to navigate your way round the mortgage maze. If you have any questions for Meryn drop us a line here or at firstname.lastname@example.org and we’l make sure she gets back to you.
“If you’re thinking of taking your first step onto the property ladder, I would recommend your first port of call should be to speak with a reputable and qualified mortgage adviser or mortgage broker, who will be able to guide you through the process and be on hand to assist with any questions you might have. A good mortgage broker will have the experience and knowledge to prepare you and set you off on the right foot.
First and foremost, before you start viewing properties it’s important to set a realistic and affordable budget. Think about your monthly income against your general household expenditure and outgoings, it might be helpful to write this down in a table or spreadsheet. It’s important to remember to be honest with your outgoings, make sure to include monthly costs of socialising and eating out, as well as money spent on clothes or hobbies, as we want to ensure you can continue to enjoy your current lifestyle and habits when you own your new home.
You should be left with surplus funds at the end of every month after all outgoings and costs have been taken into account. So, how much is left, and what portion of this would you feel comfortable setting aside for your new monthly mortgage repayments?
When setting a budget for your new home purchase, we also need to consider the initial costs of buying a property to ensure you have enough to cover these too. The biggest of which is your deposit. Usually a deposit of at least 5% of the property’s value is required, however, the bigger deposit you have, the better the mortgage deal you can get which could mean a lower interest rate.
Other upfront associated costs to be aware of can include legal fees, stamp duty, or any initial mortgage set up costs, which can all vary depending on the value of the property you are purchasing or the mortgage loan you are borrowing. It’s worthwhile to shop around and speak with a few different solicitors before instructing one to get an idea of their fees.
Once you have considered all costs and have a budget in mind, we now need to check if you the mortgage lender can lend you the amount you need. Mortgage providers will look at your income and outgoings to see if you can keep up with the repayments, as well as taking into account other factors such as should interest rates ever rise or your circumstances change. If a lender thinks you won’t be able to afford your mortgage repayments after assessing your circumstances, they might limit how much they can lend you.
Before offering on a property, you should check in advance that you are able to borrow the amount you need to purchase the property. Usually this is done by obtaining an Agreement in Principle (AIP), or sometimes called a Mortgage Promise, from a mortgage lender. An AIP is a written estimate from a mortgage lender of how much money you can potentially borrow from them.
This will give you a good idea about the size of mortgage you’re eligible for, and give you peace of mind that you’ll be able to buy a particular home. You can also show your AIP certificate to estate agents to show you’re a serious buyer and are eligible for a mortgage.
The process for an AIP also involves a credit check that the lender will carry out to assess your credit score is adequate to meet their requirements.
You can obtain an AIP by approaching a bank direct yourself, or by going to an independent mortgage broker. A whole of market mortgage broker will have access to all the available banks and building societies, and will be able to recommend the best deal to you and also why that particular bank is best suited to your needs.
Arranging an AIP with a lender can be a relatively quick process, but I would recommend taking the first steps and speaking with a mortgage adviser in advance of viewing any properties to discuss all your available options.
By taking these initial steps in advance of buying your first house will ensure you’re fully prepared and ready to offer on your dream home, without any surprises later down the line!”