Essentially, buying a house is likely to be the single biggest purchase that you will ever make in your life. Therefore, it is important to know exactly what a mortgage is! It is also key to know why you need a mortgage in the first place. Which is why we are here today to deliver a mortgage 101!
What is a Mortgage?
Before looking into the how and whys, you need to understand the what…as in what is a mortgage? You should think of a mortgage as a loan that has been taken out to buy a property or land and will usually run for around 25 years but sometimes the term can be shorter or longer depending on the contract details.
The loan is ‘secured’ against your home until the point when it is paid off. If you found yourself in a situation where you were unable to keep up your repayments, the lender is then able to repossess your home and sell it to get their money back.
Why do you need a Mortgage?
So, hopefully, you now understand what a mortgage is. Now let us look at why you need one. When you have found a house that you want to purchase you will be required to put down a cash deposit which is usually at least 5% of the total property price.
The rest of the house value will, of course, need to be paid and this will be completed using a mortgage provided by a bank or building society. You would then need to pay the amount of the mortgage plus interest back in monthly instalments over an agreed amount of years.
First-time Buyer Mortgage
If you are looking for a first-time buyer mortgage, read on. Hopefully, you have already saved a good amount of cash that can be used as your required deposit, this will be the first step. Keep in mind that however much you save for your deposit; the remainder will need to be paid through the mortgage.
As a first-time buyer, there are a few extra costs you may not be aware that you will need to consider. First, you need to have the funds available to cover the fees associated with property searches as you try and seek out your new home.
There will also need to be cash put aside for the cost of surveys, payable mortgage arrangement fees, not to mention stamp duty costs, solicitor fees, home insurance, and removal costs. There may be a few other costs that you’ll be faced with, depending on different factors such as who your mortgage provider ends up as, so you do need to keep a good-sized backup fund to cover this.
When you apply for a mortgage, the provider you select will look at your affordability as well as all the income you take home, including your annual salary. On top of this, your outgoings will be considered, so this would be bills that you pay, travel, shopping, etc. Your credit history will also be checked too.
Once all the above is sorted the lender will let you know the amount they are willing to lend you. Usually, this is done by getting an Agreement in Principle. This is a promise from the lender on how much they are prepared to give you, so the maximum mortgage loan you can have.
Here at Mortgages MK, we are the leading Mortgage advisors in Milton Keynes. We offer the full range of mortgages to our clients, from the first-time buyer to remortgages, we can assist you in finding the best interest rates for your next investment. If you would like to get a mortgage and need further information, please contact us on 01908 803362 or send us a message at info@mortgages-mk.co.uk.