Buying your first home can be a confusing and scary experience, but once you have made the decision to own your own property it makes sense to save as much as you can in order to get a better mortgage deal. Some banks and building societies will lend up to 95% of the property value, which means you will need a 5% deposit. However, in order to get the best deal possible, first, you have to look after your credit profile as this will determine how much you may be able to borrow. Here are 5 top tips from TAB – a leading property investment company:
1. Look After Your Credit Profile
When it comes to borrowing money for a mortgage the most important thing you can plan for is a clean credit file. If you borrow money via credit card or personal loan and you miss even one payment, you could jeopardise being able to borrow the amount you need to buy a house – for up to 5 years!
Every payment is logged online and is visible by lenders on your credit file. You can look at this yourself and learn ways to improve it if you get it wrong (credit repair) as well as give you some valuable information on how to build a good credit score.
2. Understanding Your Deposit
A deposit is the amount of cash, savings, or contribution to the total cost of buying a house. The balance usually comes from a mortgage. The amount you can mortgage depends on the property value (usually capped at a percentage of this) typically referred to as Loan to Value (LTV). Loan to values tend to cap out around 90% but more frequently offered at around 75% and also a calculation multiple of your earnings or income or salary.
How much you may be able to borrow, the monthly repayments, the term of your mortgage and the different options offered by a mortgage provider or lender depends on proof of income, which would normally be in the form of a minimum of your last three most recent payslips.
For example, if you earn £25k pa you could potentially borrow approximately 4 x your income:
If you borrow £100,000 and repay it over 25 years with 3% interest, each month you will pay £474.21. Therefore, the total amount repayable will be £142,263.39, and the loan will cost you £42,263.39.
3. What is a Mortgage
Simply put, a mortgage is a loan. Unlike many other loans (credit card, personal loan, overdraft) what makes this loan different is that it is secured against the property, meaning if you fail to keep up your payments the property could be sold by the bank with the first portion going to pay back the bank.
It is typically a loan of 25 years, meaning you have a long time to figure out how you are going to pay it back. You can make small payments each year to reduce the amount owed which over a long period of time will mean paying off the mortgage completely.
4. Understanding Different Types of Mortgages
Repayment Mortgage – this is by far the more common type of mortgage. In the first few years of your mortgage term, a bigger proportion of each monthly payment goes towards the interest and a smaller part towards the capital. With time, the balance shifts, with less going towards interest and more towards paying off your loan.
Interest-only – With an interest-only mortgage, you just pay the interest to your lender each month. You don’t pay off any of the capital that you’ve borrowed until the end of the mortgage term, at which point you have to pay the entire amount back in one go. Taking out an interest-only mortgage can be risky, as there is no guarantee that the money you’ve invested elsewhere will be enough to fully pay off the mortgage when the term ends.
5. Associated Costs When Buying a Property
In addition to your down payment, there are other costs to be taken into consideration:
- Survey and Valuation Fee
- Local Searches Fee
- Mortgage Admin Fee
- Broker Fees
- Solicitor’s Fees
- Electronic Transfer Fee
- Removal Costs
- Exchange and Completion
Lastly, the exchange of contracts is when the buyer and seller’s solicitors exchange the signed contracts. Completion typically happens between 7-28 days after the exchange of contracts.
If you are interested in further advice or information please click on the link below:
5 Disruptive Leaders Paving the Way in 2021
Where there is uncertainty, lies a whirlwind of opportunity. 2020 was the year that had entrepreneurs learn a great deal...
Brock Pierce Wants To Disrupt The Two Party System And Be Your Next President
We don’t usually cover politics much here at Disrupt, but when Crypto billionaire and friend of the show, Brock Pierce...
John Mcafee – Predictions For The Future
John McAfee is a world-famous tech CEO, computer scientist, civil disobedience activist, privacy advocate, and pioneer of the commercial anti-virus...
Gaby Wall Street – Teaching Latinas to Thrive During The Crisis
It’s no secret we are facing one of the most challenging financial times of the last few decades as we...
Tony Delgado – The #1 Entrepreneurship Movement In Puerto Rico
Puerto Rican online market is in constant progress. With many entrepreneurs who are coming here to start a business, it...
Elena Cardone – The 10X Ladies Conference Is Declaring 2020 The Decade For Women
The next ten years are meant for women to continue growing their potential and succeeding in multiple areas, including business....
How Josh Elizetxe Built Snow Into a $40 Million Dollar Business
There is nothing quite like an entrepreneur’s determination when starting a business. That’s my original quote by the way (pun...
How Jason Capital Became A Self Made Millionaire By 24
Have you ever wanted to earn the respect of everyone who ever looked down on you at some point in...
Sam Bakhtiar On His Way To A Quarter Billion
Dr. Saman Bakhtiar, who prefers being referred as Sam, lives in an 8200 square foot $5.2 million house, Sam is...
Women Who Disrupt5 days ago
Rihanna Becomes The First Black Woman To Own a Cosmetics Brand Worth Over $1 Billion
Entrepreneurship1 week ago
Young Business Executive Officer of Multinational Company and Economist
Community1 week ago
Interview With Bianca Peynado: Building An Authentic Community on Clubhouse
Lifestyle4 days ago
Three Strong Companies Embracing Diversity with Gay CEOs
Executive Voice2 weeks ago
How Lucia Bustamante is Giving a Voice to Women in Tech
Branding2 weeks ago
Meet Chris Groves: The Founder And CEO Of Groves Capital Who’s Bringing The Mortgage Lending Industry Online With State Of The Art Systems
Community1 week ago
Interview With Jason Diaz: Finding Your Audience and Building a Community On TikTok
Branding2 weeks ago
Meet Anish Pabari, who is leading the financial industry in present times.