Climbing the property ladder can seem like an impossible task, especially when you are a first time buyer.
Now that the cost of living crisis has affected mortgage rates, this impossible task has become an even more difficult mountain to climb.
Interest rates are climbing for the 2 million households with convertible or tracker mortgages, meaning they are tied to the Bank of England’s base rate.
Money-saving expert Martin Lewis has described rising rates as a “ticking time bomb”.
During this difficult time we’ve asked the experts and put together this guide on how to apply for a mortgage and some tips on how you can increase your chances of being accepted.
What is a mortgage?
A mortgage is a loan that you can use to help you buy a property. On average, a mortgage lasts 25 years but can last between six months and 40 years. To pay off your mortgage, you have to make monthly payments. Be aware, a mortgage is secured against your property, so if you fail to pay it, you could lose your home.
What do I need to apply for a mortgage?
A mortgage is essentially a loan used to buy a home, so you will need to apply for one from a bank or another lender.
Once you want to buy a home, you need to apply for a mortgage. This way you will know how much you need to borrow.
you will need Save a Deposit Before Getting a Mortgage – which averages now a disappointing £50,000 for first time buyers.
But raising money is not impossible without mom and dad’s bank, like Ethan Bragginton from London, who managed to buy a £135,000 house at the age of 19,
Lenders will also look at your credit score before deciding to lend to you, so it is important that you have a good score before applying.
You may also need to provide documents such as utility bills, proof of benefits, your last three months’ payslips, passport and bank statements.
How long does a mortgage application take?
It usually takes two to six weeks for a mortgage application to be approved. This can be affected by a few factors, including the lender you apply to, what information they have asked of you, and how complex your situation is.
The process can be accelerated if you use a mortgage broker who will be able to find you the best deals.
The application process usually consists of these steps:
- Finding a Deal You Want
- Talk to an advisor to get a mortgage in principle
- complete the application
- Wait for Your Estate Agents to Appraise
- Your attorney authorizes you to fulfill the mortgage on the property
What mortgage can I afford?
Your financial circumstances will determine whether you can afford the mortgage. This includes your earnings, how much you spend in a month and the amount deposited on the property you are buying.
Fortunately, there are several online calculators available to help you estimate what mortgage you can afford such as money supermarket,
Most people get advice from a mortgage broker. These are essentially a qualified intermediary who has a duty to recommend a suitable mortgage for you.
If you choose to use one, you may be able to get better deals than those offered directly by the lender, and you can file a complaint and be compensated if your mortgage becomes ineffective. Is.
But their services come at a cost and you will have to pay a fee of around £500, and sometimes there is an agent’s commission on top to think about.
What can I do to increase my chances of being accepted?
Seven tips to help you increase your chances of getting a mortgage include:
- save a big deposit, The bigger your deposit, the better. This would mean that more mortgage deals are going to be available.
- credit rating, Every mortgage lender will assess your credit rating using an agency like Experian or Equifax to look at your financial history. Remember, this is affected by your payment history, credit utilization, length of credit history and credit mix, so it is essential to ensure that you have a good rating.
- Pay off any unsecured debt, If you have huge monthly payments, it’s definitely worth paying them off before applying for a mortgage, allowing for more income for your monthly mortgage payment.
- Do not apply for any new credit, Your lender will be aware of this new payment and may wonder if you are stretching your finances.
- Make sure you are on the electoral register, Make sure you are registered at your current address. The electoral register can be checked by the lenders for proof of residence.
- Make sure you don’t have any financial ties to your ex, This can affect your credit rating. The link can be a joint bank account, credit card or loan account.
- Make sure you can prove your income, If you are self-employed or running a business, you need to do this by including your payment slip, bank details and account.
Are There Any Other Costs When Applying for a Mortgage?
Yes! Fees include,
Cost before completion:
- Mortgage arrangement (excise) fee. £0 – £2,500. It can be paid in advance or added to your mortgage but you will pay interest on it.
- Mortgage booking fee. £100 – £200.
- assessment fee. The average price is £300.
- cost of a survey. £400-£1,500 depending on the survey. This payment is made when the survey is commissioned.
- broker fee. £0 – £500. This fee can be reduced if your broker is receiving a commission to inquire about it. Some brokers are free!
- stamp duty. The price is affected by the price of the properties and if you are a first time buyer.
- transport charges. £800-£1,500. Usually you will pay it, however, some lenders will pay it for you.
- Land Registry Fee. Up to £500 online. It is affected by the price of the property.
Cost after completion:
- removal cost. Unless all of your belongings can fit inside your car, it’s very likely that you’ll want to rent a removal van, which can cost between £100-£1000.
- Service charges, land rent and maintenance. If you buy leasehold property (meaning you don’t own the land) you will pay a service fee for the protection of the property and shared areas as well as renting the land to the freeholder.
- Furniture. If you don’t have time to buy some furniture or you are living in a vacant property!
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