If you are hoping to climb onto the property ladder, then you could be in for a rude shock–mortgage options are usually huge and often seems a little overwhelming in the initial stages.
The most important factor to getting the best deal on your mortgage (and which is usually the most viable option anyway) is being armed with as much information as you possibly can.
First off, in order to reap from the best deal you need to make sure your money is in order. Better credit rating allows you for bigger deposit. This gives you more options when looking for a good mortgage deal.
So it is important to first carry out a simple credit search on yourself before you delve even further.
One question you should ask yourself is ‘how big is your deposit?’
This is one important factor when it comes to what mortgage rate you can get these days- It also translates to the percentage of the property’s value you can put down easily.
Calculations such as analyzing the official shift from old-fashioned salary multiple lending to affordability calculations are important. However, in reality quite a number of lenders have been pushing for this shift for a long time now.
It also involves weighing up your essential spending, together with your income and asking yourself questions about your outgoings.
Usually, what a mortgage lender does is to look at the gap between your monthly expenditure and what you have coming in to your account. He then derive conclusions from that.
Expect questions related to your habitual spending on things like food, childcare, car loan, energy bills, mobile phone or any contracts you have running. It’s not going to be a walk in the park either; a mortgage lender won’t just have to assess your mortgage’s affordability now, they will go a step further by taking a stab at forecasting what will happen to you in the future and perform stress test for theoretical interest rate rises.
Simply telling the lender or mortgage adviser about these things vocally is not enough; you also need to attach relevant documentary evidence of regular outgoings and what they set you back.
Another big change involves the fact that nearly all mortgage sales must now be advised, so to get a mortgage requires you to have a conversation with a qualified mortgage broker’s adviser, or if you prefer- you could go direct to the bank or building society’s own financial advice team.
You should also remember that along with getting a mortgage comes the actual cost of buying. Fees may be steep, sometimes running into the thousands of dollars, and can therefore cause quite a dent to your down payment. This also impacts on how much you can afford.
If you realise that you are overstretching yourself when buying a home, it may be helpful to hold on to the idea for a few more months or years while you get your finances in order before taking the plunge.