By now, most people will be aware of the increase in the cost of living. Interest rates, bills and consumer goods now cost more than they ever have done. You’d be forgiven for feeling like the only thing not increasing so dramatically are wages. Those who are hoping to get onto the property ladder will start to ask themselves – what action should I be taking as a first-time mortgage borrower?
Here we explore how you can prepare yourself to successfully take on a mortgage loan despite the financial turbulence that exists around us.
Affordability assessments
Before taking out a mortgage, first-time buyers will be required to ensure they can pass an affordability assessment. This process refers to the mortgage lender checking that you are in a position to pay back the loan both now, and in the years ahead. A mortgage provider can’t – and wouldn’t – lend money to a potential borrower if their financial position is questionable, as neither party would benefit from this.
To prepare yourself for the process of an affordability assessment you should expect to be asked questions surrounding your financial and non-financial status. This information provides the lender with a clear understanding of who you are and the position you are in. To help you get ready for an affordability assessment, consider the following questions prior to approaching a lender:
1. Are you on the electoral role?
2. How long until your retirement age?
3. Do you have a good credit score?
4. What type of property are you hoping to purchase?
5. Can you prove income for up to 6 months?
6. What expenses do you have month to month?
I have passed my affordability assessment; how can I reduce my mortgage costs as a first-time buyer?
Increased living costs mean you will need to find ways to reduce your monthly mortgage payments. However, this can often be difficult for first-time buyers as many are younger and have less financial backing.
The main factors that affect the monthly cost of a mortgage are the loan to value, interest rates, and the length of the mortgage itself. Below are three ways you can help reduce your monthly mortgage costs:
1. Reducing your expectations
2. Increasing your initial deposit
3. Using a professional mortgage broker
Reducing your expectations
For many people wishing to get onto the housing ladder it is crucial they purchase a property that is realistic in value for their financial position. This could mean they must be more flexible in their search to secure their first property. The good news however is that over time their new home should have gained equity – meaning they will be in a position to leverage themselves financially and purchase the home they dreamt of when they were looking for their first.
Increasing your deposit
Increasing your deposit is one of the best ways to reduce your monthly costs and inject equity into your new home whilst also helping you benefit from reduced interest payments, as your loan to value will have decreased, meaning you will pose less of a financial risk to the lender. If you find yourself saving less per month than the increase in monthly house prices, the only other way would be to benefit from a gifted deposit from a family member if you’re fortunate to find yourself in this position.
Using a mortgage broker
Finding the best deal for your mortgage will help keep your monthly costs down allowing you to have greater financial freedom each month. Mortgage brokers not only take the stress out of organising your property’s mortgage deal but also help you find the most affordable interest deals that don’t always exist in high street banks. Here at Choice Mortgage Solutions, we don’t charge you to secure a mortgage deal, allowing you to sit back whilst we do the work.
If you want help securing your mortgage deal as a first-time buyer then Choice Mortgage Solutions are here to help. Get in touch with us today to make your mortgage process more accessible than ever.