The concept of obtaining a mortgage might appear overwhelming, especially if you're a first-time homebuyer. Nonetheless, with some time, patience, and expert guidance, securing a suitable mortgage is attainable – and it doesn't have to dominate your entire life.
Here are our essential recommendations and counsel for acquiring a mortgage, whether you're at the initial stages of your property search or actively seeking a mortgage deal.
Securing a Mortgage: Early Steps You may just be embarking on your property search and not planning to apply for a mortgage soon. Here's what you can do to prepare yourself for a mortgage and make the mortgage application process smoother in the long term:
Determine an Affordable Deposit: To secure a mortgage, you'll need to save up a deposit, usually around 5% of the property's value. A larger deposit, say 10% or more, offers access to a broader range of mortgage options.
Assess Your Finances: Lenders examine your income and expenses to ensure you can manage monthly mortgage payments. Take time to review your financial situation, noting income, job stability, expenses, and debts.
Check Your Credit Score: A higher credit score expands your mortgage choices. Verify the accuracy of your credit report and address any discrepancies to reduce the risk of application rejection.
Obtain a Mortgage in Principle (MIP): If your finances are sound, you can apply for an MIP, a certificate indicating the amount you can borrow. An MIP demonstrates your seriousness as a buyer to estate agents.
Securing a Mortgage: Finding the Right Deal After having an offer accepted on a property, it's time to locate a suitable mortgage deal. There's a wide array of mortgage types, making selection challenging. While your current bank might offer options, contacting a mortgage broker can yield more favorable outcomes.
Key Considerations for Choosing a Mortgage Deal:
Repayment vs. Interest-only: Repayment mortgages cover loan and interest, while interest-only requires full repayment at the term's end.
Mortgage Term: The longer the term, the lower the monthly payments, but higher interest over time.
Fixed vs. Variable Interest Rate: Fixed rates offer consistency, while variable rates fluctuate. Fixed rates aid financial planning, but variable rates can be more cost-effective.
Fixed Deal Duration: Fixed deals span 2 to the full mortgage term. Longer durations offer certainty with slightly higher payments.
Securing a Mortgage: Submitting the Application Mortgages are tied to properties, so an application follows finding a property. Provide detailed information about your finances and the property. Necessary documents usually include ID, proof of address, income, deposit, and spending details.
Once submitted, it takes 3–6 weeks for the lender to process. This includes document checks, credit assessment, and a property valuation.
What's Next? If everything aligns, you'll receive a written mortgage offer accompanied by a mortgage illustration explaining key features. Carefully review the offer, terms, and illustration before acceptance. Seek advice if needed. Once content, sign to solidify your mortgage. Congratulations on progressing toward homeownership!
