Purchasing a property or moving home is certainly one of life's most significant milestones - but it can also prove to be a nerve-wracking, confusing and stressful process when 'going it alone' without professional support. Before you start looking for your new home, whether you are a first-time buyer, looking to re-mortgage, move home or to purchase your next investment, it is important to choose the right path which will ensure the best financial outcome for you. Bradley Hall’s mortgage team answers your questions on mortgages.
Q. What first steps should I take?
A. Figuring out how much mortgage you can afford with dictate your entire property search. Comparing mortgage rates will give you a rough idea of what interest you may pay, and by using a mortgage calculator you could figure out roughly what your monthly payments may be.
Lenders will also consider a range of personal and financial circumstances which will impact the amount of money they offer you. Therefore, figuring out your actual affordability is more complex than the usual mortgage calculator and can be a rigorous process with a range of small details which will impact your final mortgage in principle.
An agreement in principle is the indication of how much you could borrow, based on your income, spending and debts, which will allow you to consider properties within your budget.
You should also begin research into which solicitor or conveyancer you will appoint in due course.
Q. What will I need to apply for a mortgage?
A. Ensuring you are on the electoral role will support your credit rating. Make sure you review your credit file. If you think information on your file is wrong, ask your bank to correct it or challenge it with the credit reference agency. Any errors on your credit file can lead to your application being rejected. Ensure your paperwork is ready. When you apply for a mortgage, lenders will look at your income and outgoings. To prove your income, you will usually need to show pay slips and bank statements from the last three months. If you are selfemployed, you will need copies of your tax return and business accounts.
Make regular card payments. Make sure you avoid missing card payments or paying late by setting up direct debits. Keep your financial circumstances as stable as possible in the months running up to an application and try not to apply for any new credit accounts.
Q. Can you tell me more about the different ways to repay a mortgage?
A. A repayment mortgage: your mortgage payment covers the interest and helps to reduce the overall amount which you owe.
An interest only mortgage: your mortgage payment only covers the interest on what you owe. At the end of the mortgage, you pay off the amount you have borrowed using savings or investments built up during the mortgage period.
Q. Is there any support to help me get onto the property ladder?
A. There are a number of options which can be used to help first time buyers onto the property ladder, each supporting different circumstances and affordability levels. Options include the Help to Buy: Equity Loan, Help To Buy ISA, the Right To Buy scheme for council housing tenants, Shared Ownership and The Mortgage Guarantee Scheme.
Q. What is the mortgage guarantee scheme? A. The mortgage guarantee scheme is designed to increase the appetite of mortgage lenders for high loan-to-value lending to creditworthy customers. It will provide lenders with the option to purchase a government guarantee that compensates them for a portion of their losses in the event of foreclosure. The government will charge a commercial fee for the provision of this guarantee.
The scheme allows you to get a mortgage with just a 5% deposit and the 95% mortgage offering will run for 18 months until December 2022. You must have a regular income, a good credit rating and show that you can afford the monthly mortgage repayments.
Q. What is the help to buy scheme?
A. Help to Buy is a government scheme which will run until 31 March 2023 to help first-time buyers get a property with just a 5% deposit. You can borrow 20% of the purchase price (40% in London), interest free for five years. Terms and conditions apply.
If you would like to find out the best mortgage options for you, please contact the Bradley Hall Mortgages team on 0191 260 2000 or email mortgages@bradleyhall.co.uk
