A mortgage is a source of funding when you want to purchase a property. You essentially agree to give away part ownership of the building to the Real Estate or mortgage lender in exchange for the right to use the premises and pay back the money over a period of time; finally owning the property outright once the final payment has been made.
Getting a mortgage can be a daunting task, as lenders will scrutinize your financial background to determine whether or not they believe you will be able to afford the repayments. Especially for young, first time applicants, the process can be very off-putting but if you make the necessary steps to be prepared, getting a lender to agree to a mortgage can be a lot less difficult.
Think Long Term
Buying a property is a long term investment and should never be rushed into. A deposit of 5-10% of the property’s purchase price will usually be required upfront, so saving up before you apply for a mortgage is a good idea. Waiting will also allow you to pay off any other personal debts you have, improving your chances of being accepted and reducing the financial pressure you will be under should you be granted a mortgage.
When it comes to organising the terms of the mortgage itself, the temptation is often to pay it off as soon as possible and if you can, by all means do this. If you are young however, a longer, fixed-term mortgage over 30+ years can reduce individual payments and make staying on top of your debts considerably easier.
Making sure that any small but necessary procedures have been completed prior to applying for a mortgage can help make the process as smooth and timely as possible: Make sure you are registered on the electoral roll; keep a record of all your past pay slips; have as little debt as possible and consult your credit history to know your credit score. If these formalities are already taken care of, you reduce the chance of facing awkward questions or unnecessary hold-ups during the application process.
Avoid Extra Perks
Banks and other lenders will often use their sales team to try and squeeze extra money out of you by pressuring you into accepting extra ‘perks’ on top of your mortgage. Most of these extras are of little use to the consumer and are best avoided when looking to reduce the amount of future debt you will be in. Mortgage Payment Protection Insurance (MPPI) was mis-sold to many people under the pretence that it was compulsory. Its purpose is to ensure the continuation of monthly payments should the borrower become unable to work but many consumers have no want or need for the policy. MPPI – and other ‘perks’ like it – are often best left untouched.
Remember that while property prices may be poor within the current economy, mortgages and house ownership are long-term ventures and the value of a building may well rise over time, allowing the chance to make a profit out of your investment. First time buyers do not need to purchase the house of their dreams; budget carefully and buy based on what you can afford, with the aim of working your way up the property ladder as time moves on and the economy improves.
About the Author: This post was written by Gladstone Brookes. As a UK based Claims Company specialising in Payment Protection Insurance (PPI), they represent consumers in their efforts to reclaim money from mis-sold policies, including those related to mortgages. Accepting requests even from those who have previously been turned away by their banks, they have already managed to reclaim over well over £128 million.