Purchasing a home – The mortgage process

There’s no doubt that the biggest financial decision you’ll make in your lifetime (if you’re lucky enough) is to buy your own home. It is a process that can test your patience and your purse strings, but one that is certainly worth it at the end.

 

There are various stages to buying property, the first being the all-important stage of choosing a home or apartment that you feel you can live in for the foreseeable future; so you need to consider elements such as the local area, crime levels, council tax and even things we take for granted such as parking.

After this stage comes the purchase, and how you go about it often depends on your circumstances, and as a result, many banks and firms will offer you different options.

Getting a mortgage 

Unless you can afford to pay for a home in one lump sum (“yeah, right!” I hear you cry), you will need to get yourself a mortgage which is a long-term loan to help cover the cost of the house, flat or apartment.

With a mortgage, the initially worry will be how much of a deposit will be required; with lenders usually asking for between 5% and 25% of the property’s value up front and the rest to be paid in monthly installments.

There are three kinds of mortgages that include fixed rate, variable rate and interest only.

• Fixed rate: This can be a great option to take if rates are low enough, but not worthwhile if the repayments are out of reach. Periods for a fixed rate mortgage usually last between one and 10 years.
• Variable rate: Repayments through this method will fluctuate depending on the Bank of England’s base rate, but the maximum rate will depend on the lender you are with and you can switch leaders if you please during this option.
• Interest only mortgage: Use this method if you wish to borrow more than you would with the other two, as you will only pay back the interest and not the loan itself.

The actual amount you can borrow from lenders will depend on your status; for example, if you are living alone, you can lend up to three times your annual salary (although with a clean credit record this can sometimes go up to five times your salary). Buying a house as a couple offers more allowance of the amount you can lend; in this case, you will be able to borrow three times the main income and up to two times the secondary income the household brings in.

Lenders will ask for a professional valuation of the property you are in the process of purchasing in order to determine their investment with you and will be arranged by the lender themselves, but it will be your responsibility to pick up the bill. A detailed survey can also be undertaken at this stage and will ensure the safety of the building’s structure.