A mortgage is the biggest loan you’re likely to take out in your lifetime. There are all kinds of tricks to the trade that you won’t know as a first-time buyer. Swotting up on these can help you to find the best deal and ensure that your first mortgage isn’t something you later regret.
Save up smart
The bigger deposit you can lay down, the less costly your mortgage will be in the long run. Saving up this amount of money requires being smart – regular saving could take years. Consider using a savings account that will build up interest over time. Another alternative to invest your money elsewhere. Investments can be a risk – it may be worth hiring an investment broker that knows the safest places to put your money. Eventually you will make a return, allowing you to afford your first deposit.
Fix your credit score
Very few lenders will take you on if you have a bad credit score. This is because they don’t trust that you will pay back your monthly instalments based on your previous financial activity. To repair your score, you need to first wipe out any debts you have. Start with the smaller ones – these could include personal loans or credit card bills – and then work up to the larger ones. You can also consider a credit-builder loan. By taking this out and paying it back in regular instalments for a year, you can fix your credit score, despite previous history and debts you may still have.
Know your budget
Having a clear idea of your budget is important. This will prevent you taking out a mortgage that you later find you can’t afford. There are online mortgage calculator tools that can help count up costs and better understand the qualification needed for specific mortgage schemes. Remember to add other costs into your budget such as valuation fees, legal fees, surveyors and the cost of a moving company.
Consider a broker
Mortgage brokers shop around for you to find the best deal. If you have a low credit rating, they may know which places to approach that are least likely to reject you. If you have only a small amount of money to lay down as a deposit, they can find you mortgage lender that will take you on and charge the least interest. Mortgage brokers are useful – especially if you have little understanding of mortgages and would prefer someone more experienced to make the financial decision for you. However, there are cons to using a broker. Firstly, they will charge commission, making it an extra cost on top of all the other buying costs. Secondly, there are some lenders out there that don’t work with brokers – these may be charging better rates, which may make it better to go direct. If you can afford a broker, it’s certainly worthwhile, but don’t let this put you off from doing your own research.