Your Guide To Getting A Mortgage

by : michael sterios

With buying a house the biggest single financial outlay you're likely to make in your life, making sure you get the right mortgage for you is extremely important. However, with a little bit of forward planning and some research, as well as making use of the experts in the home-buying market, buying your own home can be an easier proposition than you might have thought.

Where to Start

The first thing you need to decide is how you want to arrange your mortgage. There are various ways, and each has their own individual pluses and minuses over the other. For instance, you could go through your bank, but they can often be less competitive and restricted for choice. Or you could go through a dedicated mortgage lender, who has more of a choice available, yet may charge more interest.

The best way to decide is to speak to more than one company - enlist the help of an independent specialist, if you prefer, who can give you an unbiased opinion of what's right for you. It may cost a little extra, but it'll save your pocket in the long run.

How Much to Borrow

One of the biggest stumbling blocks for people looking to get on the property ladder is the amount of mortgage they can get. Dependent on your circumstances, on average you can borrow up to 3.25 times your income, as well as adding on your partner's annual income. So, if you both make £50,000 per year, you could get a mortgage for £212,500.

Or, if it works out better, you can combine the incomes and you would be eligible for up to 2.75 times the joint amount. Using the same example, you could apply for up to £275,000. Whatever amount you are approved for, you normally have to pay a 5% deposit, so you need to take that into consideration.

You can get what's known as a 100% mortgage, but they're usually a lot more expansive - often as high as 1% - so they should only be used as a last resort. Also, be wary of lenders that are willing to loan you 5 times your salary, or ones that don't need to see proof of earnings - their interest rates and payments can be crippling and could result in you losing your home.

Finding the Best Deal

Once you know how much you can borrow, the next step is finding the right deal for you. This is where you need to take your time and make sure you choose the right offer and not the "best" one. It may be tempting to go with a company who offers you low interest rates of 5%, for example, but you'll usually find this is for a limited time only.

After that, your rates will hike up above the normal amount, or you might have to take out high-cost insurance cover with the same company. Make sure you look at all the small print - the best type of mortgage is one that has a fairly steady interest rate and allows you to move to a more beneficial type at a later date.

What Type of Mortgage to Take Out

In the UK, there are two main types of mortgage - a repayment one, and an interest-only. The first one is the most common, since it ensures that your monthly payments will mean your home is yours at the end of the mortgage period, usually 25 years.

Interest-only is exactly that - you are only paying the interest each month, with a lump sum to pay off at the end of the mortgage period. While this is good for keeping your payments down, it's highly risky, since if you can't cover the lump sum at the end, you'll lose your home.

There are other things to take into consideration, such as should you use a mortgage broker or not, and how long you should spread the payments over. But the above points are the main ones to look at when you're considering getting your own mortgage.