What will lenders want to know?
When applying for our mortgage we each had to take in the following documents:
- Last 3 months bank statements
- Last 3 months wage slips
- Latest P60 form
- ID (driving license or passport)
- Proof of address
They also asked us if we had any other loans or credit cards, so it’s best to be prepared with exact figures of monthly repayments and end dates.
Since we bought our house they’ve got stricter and now even ask you about other living costs such as how much you spend on travel, clothing and entertainment. I’m sure they’ll soon start needing to know the last time you had a cup of tea or painted your toenails.
Which type of mortgage should I go for?
FIXED REPAYMENT! Interest only mortgages are pointless as your monthly payments would just cover the cost of borrowing the money instead of reducing the amount you actually owe.
Although fixed mortgages can sometimes have higher rates to begin with, unlike variable rates, your payments will not go up so you know exactly how much you’ll be parting with each month. To partly combat the higher rates we have ours fixed for two years at a time. This means that every two years we get to shop around and find the best rate possible, we recently saved over £200 a month by switching rates.
How long should my mortgage run for?
On average people set their mortgage to run for around 25 years, however as we bought the house when we were both 20 we went for a 35 year term so if we keep going we’ll be mortgage free at 55. By extending the mortgage term the payments are cheaper as the cost if spread over more months – this is beneficial to first time buyers and the term can always be reduced when you start to earn more.
What are the help-to-buy schemes for first-time buyers?
There are many different help-to-buy schemes that have been put in place by the Government. If you are saving to buy your first home then I would strongly suggest you look into the Help to Buy: ISA as it boosts your savings by 25%!
If you’re looking to buy a brand new home then there’s the Equity Loan scheme where the Government lends you up to 20% of the costs, meaning that you’ll only need a 5% deposit and a 75% mortgage.
The Mortgage Guarantee scheme does the same sort of thing for older homes. You’ll still only need a 5% deposit but you’ll have to take out a 95% mortgage. There are only certain lenders in the scheme so it’s best to look on the Government website first.
If you have any more questions then I’ll be more than happy to post another Q&A, just comment below!