First Time Buyer? You Need A Mortgage Broker

Every home owner was a first-time buyer once. Remember how confusing it seemed when you first started?

Nowadays there are an increasing number of mortgages for first-time buyers – a good mortgage broker can point you to them. So if you’re just getting your toe on the first rung of the ladder, these are the steps to take to get started.

1. First of all, before even looking for a mortgage broker, sit down and work out your finances carefully. Tot up your total income, and ALL your outgoings. Be absolutely clear about how much you can afford to pay out each month.
2. Next, find a good mortgage broker to see what’s available in the way of mortgages. Don’t use your estate agents or your local bank. They will only tell you about their own products. Make sure you look for a mortgage broker who is “whole of market” – that way, you have the best chance of finding the product that is most suitable for you.
3. You need to decide whether you want a fixed rate, a standard variable rate, or a discount mortgage. There are pros and cons to all of these and your mortgage broker will explain what they are.
4. Decide how much of a deposit you can afford. The bigger the deposit, the cheaper the loan will be. If you can raise enough of a deposit to keep your loan below 80%, or 75%, of the purchase price, you should get a good deal. If you can’t manage that much, ask the mortgage broker to find you a lender who doesn’t impose a “Higher lending charge” (Mortgage indemnity premium).
5. You may be finding it hard to save up a deposit at all, and be worrying that house prices will have gone out of your reach before you can get your deposit together. If you are a graduate, you may be able to take advantage of a “graduate mortgage”. Some of these will allow you to borrow up to 110% of the value. There are also other mortgage products which allow you to borrow 100%, or even more. This can help you get started – but be very careful. It can be very risky to borrow more than the house is worth unless you are pretty certain that the price will rise. The mortgage broker will explain all the pros and cons.
6. Normally you would be wise to choose a repayment mortgage, as you will want to get your loan paid off as quickly as possible. However there are some First Time Buyer mortgages that allow you to pay interest only for a certain period – say three years. Of course you won’t be reducing your debt during this period, but the lower payments will help you get established. The hope will be that by the end of the period both your income and the house value will have increased, so it won’t be too painful to move to a repayment basis. Ask the mortgage broker if you are interested in finding out about these.
7. Buy your new home and enjoy living in it!

The mortgage broker is there to help you so don’t try to go it alone. It can all seem a bit worrying at first, but once you are established in your new home it will all seem worth it.

Sean Horton is a Director of Enhanced Wealth Limited who are a specialist mortgage broker