10 Essential Tips for Taking Out Your First Mortgage
January 29 2020 Posted by
Taking out your first mortgage is a significant financial commitment, possibly the biggest one you'll ever make, so it's crucial to get the best deal available. Getting a mortgage is often not a quick and straightforward process either, mainly since the options available will vary depending on factors such as income, credit score and any past or current borrowings you might have.
1. Save Up a Large Deposit
Mostly in all cases, you'll need to have a substantial deposit to pay towards the home you want to buy. Fortunately, those with higher deposits will be able to take advantage of better interest rates and a more comprehensive range of borrowing options.
2. Choose the Right Mortgage Type
There is a broad range of mortgage options available, particularly to those with more massive deposits and excellent credit ratings. Most importantly, you'll be choosing between a fixed- and variable-rate package. Fixed-rate is a specific interest rate for a period of up to five years, making them the best choice during periods of low interest rates across the board.
3. Understand the Extra Costs
When determining how much you need to borrow, also factor in the additional costs involved, most of which are unavoidable. Additional charges may include home inspections and real estate fees.
4. Don't Borrow Too Much
It makes sense to borrow a large amount if interest rates are low all the time, but only if you have something to invest the money in. After all, there's no point in having the money borrowed sitting in the bank while you're paying interest on it. If the home you're interested in buying needs a substantial amount of work done on it, make sure to get some estimates to find out how much money is required.
5. Check Your Credit Score
Your credit score determines borrowing power, and it's the first thing that potential lenders will examine when considering your application. Check your credit score online for free using agencies like Equifax or Experian. If you have a bad or neutral credit score, borrowing options will be fewer or even none at all, so it makes sense to work on improving it before buying a home.
6. Don't Change Jobs
Potential lenders are likely to be turned off by applicants who have recently changed jobs, so it's wise to apply for a mortgage only once you've been in the same job for at least six months. If you're unemployed or still on a probationary period in the job, many lenders will not accept the application unless you have an excellent financial record. Once you have the application approved, you're free to do anything
7. Eliminate Debts
Any existing debts may reflect poorly on your credit score, in turn making it more challenging to get a good mortgage deal. Also, leading to a situation where the debts have reached such a level that you cannot afford the monthly mortgage payments. Always make sure your financial situation is stable and debt-free before making an application.
8. Provide Proof of Income
All mortgage lenders require applicants to present proof of income so they can decide whether or not the client can make the monthly payments. Monthly pay stubs should provide all of the information they need. If you're self-employed, things can get more complicated, mainly if you haven't been self-employed for a long time.
9. Overpay When Possible
When choosing a mortgage deal, it is not only essential to afford the monthly payments, but also that you will have plenty of leftovers. Since a mortgage is typically a very long-term commitment, you should try to overpay as much as possible, to eliminate the debt earlier on. Paying a mortgage off sooner will look better on your credit score and improve long-term finances
10. contact a mortgage broker
A Mortgage Broker's primary expertise is locating funding for mortgage financing. They know where the best rates are found. What's more, they have the knowledge required to present a proposal for financing to lenders in the best way possible to obtain mortgage financing successfully.
Although you should dedicate plenty of time to researching the best deal, it is essential to remember that you're not locked in for the entire duration of the mortgage. You can always remortgage your home later on with a more attractive deal should the opportunity arise. There will be charges involved in transferring your mortgage debt, but the long-term savings can be substantial.