16th February 2010 by
admin under
Banking
The time has come for you to buy a house, but for a first time buyer, the housing market can be frightening and confusing. Unethical lenders may try to ensnare you with high interest rates and a loan that will have you paying for years. Many houses are priced out of the range affordable by first time buyers. The market for mortgage loans fluctuates every year, the interest rates rising and falling without apparent rhyme or reason. All these things make finding a good deal on a house difficult.
A first time buyer should consider a number of factors before going to purchase a property, such as how much they will be permitted to borrow, how much they can afford to pay per month, the initial cash outlay for fees and deposit, and what kind of mortgage they ought to use. A mortgage broker, who will act as an intermediary to find you the right mortgage, can help immensely to ease this process.
It can be dangerous to borrow too much money to buy a house, no matter how tempting the idea of home ownership is. The problem of negative equity is when your mortgage is worth more than your house, is still a danger. Many first time buyers consider only the monthly payment when they sign up for a mortgage. It also is important to look closely at the full amount you will be paying, and the length of time it will take to repay. Some kind of deposit is normally required, as well. Though there are a few lender who will offer a mortgage for 100% of the price of your house, these are rare, and will ensure a long payment process. It is best to have at least 5% of the purchase price. If you have 10% or more, you can secure a better deal on your mortgage.
There are many different types of mortgage that can be chosen. These include the fixed rate mortgage – with an unvarying interest rate over the life of the loan, the adjustable rate mortgage is one where the interest rate is periodically adjusted based on a index, and the interest-only loan is where for a period of time, the buyer pays only the interest on the loan, then must begin making payments on the principal. These last two types can be tempting to the first time buyer with little income, but can result in more money paid out over the lifetime of the mortgage. An adjustable rate mortgage can be the better deal if interest rates continue to fall, but worse if they rise. Interest only loans permit a buyer who will be in better financial shape in a few years to get a foothold in the housing market. The downside is that the principal will be untouched for those years.
With careful planning and consideration, the housing market need not be frightening or daunting to the first time buyer. All that is needed is a good assessment of your needs and situation.
26th February 2009 by
admin under
Banking
Buying your first home can be a very exciting time. Getting on the property ladder and gaining your independence can be a hugely fulfilling experience. However before you reach this stage it is likely you will have to overcome many challenges including saving a deposit, finding a suitable property, paying a range of legal fees and securing the right mortgage.
Arranging your first mortgage can be very daunting with a mind-boggling number of products available and lots of jargon and legal processes to be understood. A house is likely to be the single biggest purchase you ever make so ensuring you compare mortgages to find the right one is vital.
The first step is to work out how much you can afford to borrow. This is dependant on a number of factors including your income, your credit history and the value of your deposit. Mortgage products are available for up to 125% of the purchase price, but typically a 5-10% deposit is required. Saving up a larger deposit could allow you to secure a more competitive mortgage rate. On average a £100,000 mortgage at 5.5% over 25 years would result in monthly repayments of around £620.
Once you know how large a mortgage you are likely to qualify for the next step is to compare the market to find mortgages most appropriate to you. At this stage you will also want to start looking for suitable properties in your price range. There is little point approaching a lender for a mortgage if there isn’t a property you like in your price-range. However, if you can find properties you like, it is advisable to have a confirmed ’agreement in principle’ in place from a lender before making an offer as this proves you are a serious buyer
There are many mortgage products out there so visiting the internet and using a mortgage calculator will mean you can compare products more quickly. When searching the market you will find a range of mortgage products on offer. These include fixed, tracker, capped and discounted rates. Fixed rate mortgages are a popular choice with first time buyers as they allow you to budget your expenditure with a greater degree of certainty.
When deciding which mortgage product is right for you there are several factors to consider. Firstly is the rate competitive? The best way to determine this is to use an on-line mortgage comparative site that will allow you to compare all the products in the market. Secondly is the rate likely to increase? Tracker and discount rates may appear more attractive than a fixed rate but could you afford the additional repayments if interest rates were to increase? In addition to these factors it is important to consider the fees that will be applicable to your mortgage. These can include a valuation fee, a booking fee and an arrangement fee. In addition to stamp duty these fees can have a significant impact on the affordability of your mortgage.
Once you have found a suitable mortgage you have the option of either contacting the provider directly, or, if you feel more guidance is required you can contact a financial advisor who will speak with you about your requirements and help you arrange a suitable mortgage. The mortgage market can be a confusing place and the best action to take if you are unsure is to take professional advice. Choosing the wrong product can be a very costly mistake.
Peter Ecob is UK based writer with experience in the personal finance industry.
