Things To Consider Before Getting A Mortgage

by - 28 February

*Collaborative post.

With news that 95% mortgages are being brought back and the stamp duty cut possibly being extended, then now is the perfect time to buy a house. There are some things to consider though before getting a mortgage and that's exactly what today's post is about. Hopefully, you will come away with things to research that will help you get the best deal and your perfect house.

Your Budget

Firstly, the most important thing to consider before even thinking of picking a mortgage and buying a house is your budget. How much can you afford and how much of a deposit do you have saved up? Ideally, you want to be aiming to save at least 10% of the house price you are looking at for your deposit but as I mentioned above, 5% deposits are back so it will definitely open up your options. Things like Help to Buy ISA's and Lifetime ISA's will really help you save more money towards your deposit too. I will be talking more about those and other options available in the next section. 

Help To Buy and Other Assistants

There are numerous helpful assistants out there to help you buy a house. A few of them being Help To Buy and Lifetime ISA's, Shared Ownerships and Equity Loans.

Help To Buy and Lifetime ISA's

Help To Buy ISA's are now closed to new customers but if you already have one then you are still eligible to use it until November 2029. Basically, it is a bank account that you can initially deposit up to £1200 for your first month and then up to £200 every month after up to a total of £12,000 and then the government will pay 25% of your total towards your fees when you buy a house. 

Lifetime ISA's are slightly different. With a lifetime ISA, you can either use it to save for your first house or save for later life. You must be 18 or over and under 40 to open one. You can put up to £4000 per year into it until your 50, the government will then add a 25% bonus to your savings, up to a maximum of £1000 per year. 

Shared Ownerships

Shared Ownerships are exactly what they say on the tin. If you cannot afford a full mortgage but still want to buy a house then you can use a shared ownership to buy between 25-75% of a house which you will then pay rent on the other percentage. You also have the option of buying bigger shares later on. You are eligible to buy a shared ownership if your household earns £80,000 or less per year outside London or £90,000 inside London.

Equity Loans

If you are a first-time buyer in England, you could also look into Equity Loans. What this is, is a loan which you can borrow from the Government to put towards the cost of a new build house. You can borrow a minimum of 5% or a maximum of 20% which is 40% in London. The homebuilder must be registered for the Equity Loan service so definitely bear that in mind. For more information on Equity Loans do check out the Help To Buy Government website. 

Choosing a Mortgage

 So now you've worked out your budget, you've found a house you like and you have your help in place, now you need to choose a mortgage.

When it comes to choosing a mortgage, you need to shop around. I personally would start by using a mortgage calculator to work out how much you will need, the breakdown of the details of the mortgage along with how much you would be paying monthly as well as overall on the two different types of mortgages available, depending on which you want. This mortgage calculator is great as it breaks everything down and you are able to play around with the entries to make everything fit.  

I would also shop around with various banks as each bank has different deals available. Use their calculators to give you a rough idea of which of their mortgage deals you would need and then compare it with the different banks available. You will find the best possible deal this way. 

Overall, I would say do a lot of research before diving in and picking a mortgage as they are huge commitments and sometimes confusing so it's better to know what you are getting yourself into beforehand. If you know any more things to consider before getting a mortgage, let me know in the comments below and while you are here why not check out more of my home content?

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