If you’ve already got a 5% deposit saved up and you want to buy your first home straight away, then this guide could help.
After the 2008 financial crisis, you needed at least a 25% deposit to get a mortgage. But more recently lenders have once again started to lend to people with smaller deposits and there are now a number of lenders that will lend you up to 95% of the property’s value. If you want to secure a 95% mortgage you will need to get your finances in order first.
Are you a spender or a saver?
Before a lender will approve you for any mortgage they’ll check your credit history and go through your income and expenditure in detail to ensure that you can afford the repayments. This is why you should make sure you’re making all your bill payments (like your mobile and utilities bills) as well as any loan or credit card repayments on time and aren’t overspending on non-essentials like takeaways and beauty treatments.
You might feel that you’d be able to comfortably make your mortgage payments, regardless of your current spending habits, but it’ll be down to lenders to decide. They need to consider whether you’d be able to pay your mortgage, not just at current interest rates, but also if interest rates rose 2 – 3% in the future.
Buying a property is a huge financial commitment and you should never rush into getting a mortgage. Remember that if you fall behind with your repayments you could lose your home. Before you apply for any mortgage make sure you check out our simple guide to mortgages.
Fixed rate mortgages
If you’d like the security of knowing exactly how much your mortgage payments will be each month then you’ll probably be focusing your attention on the fixed rate deals that are available. If you chose a two-year deal now then your payments will be fixed until the end of 2017/early 2018 (depending on when you take out your mortgage).
There are also three, five and ten year fixed deals available so you need to weigh up what would be the best deal for your situation. Fixed deals often give people peace of mind but there are other types of mortgages to consider too.
You can see what your monthly mortgage payments could be, depending on the different interest rates, by using this handy calculator.
Help to Buy
The government offers a number of Help to Buy schemes for first-time buyers which could help you buy your first property. From December 1st, if you save for your deposit in a Help to Buy ISA* you could receive an extra 25% - for more information click here >
The Help to Buy Equity Loan or Help to Buy Mortgage Guarantee might also be worth investigating. Find out more here >
*It was reported in August 2016 that the government bonus on Help to Buy ISAs cannot be included in the initial deposit on a home, but is paid once the sale has completed. Find out more here.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.