Mortgage tips: 3 things YOU need to know when applying for a mortgage
Martin Lewis gives advice on paying mortgage with savings
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Buying your first home – or in fact, any home – can be a little daunting. Getting a mortgage will likely be the single biggest financial commitment you’ll ever have to make. Knowing how to get a mortgage can be confusing. Here are some simple things you should know about, to help you get onto the property ladder.
Improve your credit score
Your credit score matters when you apply for a mortgage.
Some lenders won’t let you take out a mortgage with them if your score is too low.
There are plenty of ways to boost your credit rating, such as simply shutting down old accounts you haven’t used or updating your address.
Making sure you are on the electoral roll is another great step.
You may also want to take out a credit card, as using this and then paying off the balance in full each month can help to improve your score.
Short or long term mortgages
A mortgage term is the length of time it will take you to pay off your loan.
You can choose between a short or long term mortgage.
A short-term mortgage is usually 20 years or less, while a long-term one is often 30 years or more.
The most common mortgage term in the UK is typically a 25-year mortgage.
Which one is best for you will depend on how much you can, or are prepared to pay a month.
If you agree to a short-term mortgage, your monthly repayments will be more – but, you’ll ultimately pay less in the long run as your interest will be less.
If you pick a long term mortgage your monthly repayments won’t be as high – but you’ll pay back more ultimately as you’ll pay more in interest.
So if you can opt for the shortest term you can, but it shouldn’t be too short so you end up struggling to pay back the monthly repayments.
Boost your deposit
The more you can put down as a deposit the better, as mortgage lenders offer more favourable rates to those with bigger deposits.
Usually, lenders require a minimum 10 percent deposit, but for first-time buyers, this can be as low as five percent under a new Government scheme.
But, if you have a high deposit, you will be able to benefit from lower monthly repayments.
With a large deposit, you will be able to access a wider choice of mortgages, as many lenders will refuse to lend to those with small deposits.
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