With the latest figures from the Council of Mortgage Lenders (CML) revealing that first-time buyer numbers increased by 20%, it seems that many are keen to get on the first rung of the property ladder, despite some of the financial hurdles involved.
Here are just some of the things that buyers need to consider when taking out mortgage on their first property.
Finding the right mortgage
There are a number of options for finding the right mortgage for your needs, and this can include looking at online comparison tables, seeking the advice of a mortgage broker or asking what mortgage products your bank or building has to offer.
It’s important to understand that there are a range of mortgages on offer, including repayment, interest-only and offset mortgages – where any funds in your savings and current account are used to reduce your mortgage payments or the term of your mortgage – and it’s important to assess the individual merits of each mortgage type carefully.
Ensuring your documentation is in order
When applying for a mortgage you will need to present a range of documentation to your lender and having this in advance will help to ensure the process of securing your mortgage doesn’t have any unnecessary setbacks.
This documentation will normally consist of your last three bank statements, full details of any loans or credit cards you hold, your last three payslips and your last P60 form or three years’ accounts if you are self-employed, and your address history from the last three years.
Reviewing your credit report with credit agencies such as Experian before you apply for a mortgage will also help you to ensure that your credit history/score are in order.
What you can borrow
As a general rule buyers can secure a mortgage for a property value that is four times the size of their income, though this will vary from lender to lender.
According to the CML the average loan-to-value ratio for first-time buyers has remained at 80%, meaning that first-time buyers will need to raise an average deposit of 20%.
However, a number of government schemes such as Help to Buy and New Buy offer buyers the chance to snap up a new build property with a deposit of just 5%, and there are 95% mortgage deals on the market.
Online mortgage calculators are a good first port of call to calculate how much you can borrow over an average term of 25 years.