Putting your foot on the mortgage ladder

The criteria for arranging a mortgage is now somewhat more complicated than it used to be a number of years ago. Whether you’re taking the first step onto the property ladder, re-mortgaging, moving house or capital raising, mortgage lenders now want to be certain that you can afford the repayments.

A mortgage is simply a loan taken out to buy property or land and secured against the value of the property until it is paid off. Failure to maintain the repayments of the loan risks the lender repossessing the property and subsequently selling it in order to recover their outstanding loan. This often means the lender receiving a lower value than the debt is worth and so is often the very last resort.

New affordability rules were introduced in 2014 and mean that as well as proof of what your income is, lenders frequently want to see proof of what you spend and details of any other debts. If you have a high level of outgoings lenders will be concerned that should there be an increase in interest rates, you may not be able to maintain the repayments and therefore may refuse the mortgage. 

Most banks and building societies offer a range of different types of mortgages and some will let you apply directly, whereas others may insist upon you using a mortgage broker or financial adviser. You also need to think about the type of mortgage you want to take out and over how many years. Here are some important considerations:

Do you want to fix your payments for a period of time, or are you happy to have the payment vary with changes in interest rates? Do you want the option to make any additional over-payments, or be able to move the mortgage with you to another property during the term?

Perhaps the most important consideration beyond affordability is the deposit you have available, as the bigger this is the more options you will have in securing a more competitive rate, because the lender is effectively taking less risk due to the loan being secured against a smaller proportion of the property value.

As applying for a mortgage has become less straightforward and there are now even more things to consider, it may be worth using a mortgage broker or financial adviser to assist you in arranging your mortgage. There are thousands of mortgage deals available and an expert could take away some of the stress by being able to recommend the most suitable product for your personal circumstances. They can easily compare the marketplace, assess your income and outgoings, submit paperwork to the lender on your behalf and also deal directly with them to help complete the mortgage on your behalf. Be aware that there is usually a cost involved for this.

If you wish to discuss your requirements, please contact us. We are independent mortgage advisers, so have access to the whole mortgage market, meaning that we may be able to access deals that aren’t readily available on the High Street.

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