A property is probably the most valuable item that you will ever buy. Unless you are lucky enough to be able to afford the whole purchase price, you will need to borrow a substantial sum of money to be able to buy a home. Continue reading below for top tips for financing a property purchase.
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The Mortgage
Most buyers will need to arrange a long-term loan in the form of a mortgage, unless you have another way to raise the cash, such as choosing to sell annuity for cash. A mortgage can be obtained through building societies and banks. The lender will charge interest on the loan and this, along with the sum borrowed, is repaid over time.
There is a wide choice of mortgage schemes and the market is competitive. It’s always changing and the options can be confusing.
While you can choose to do all the research yourself, it’s better to talk to a qualified financial adviser.
The Financial Adviser
There are financial advisers who only give advice on a limited range of lenders. And there are some who can give unbiased advice on a whole range of financial products from all the different lenders.
Most banks have Restricted Advisers, but some have IFAs. Your real estate agent will be able to suggest a financial adviser.
This advice might be given free of charge at first, and the adviser must inform you of any later costs. Some will charge a fee for arranging a mortgage, but others are paid by the lender.
Working Out How Much You Can Borrow
There are lots of factors that will influence the amount that you can borrow, and though there are a lot of online calculators. These don’t give an absolute answer to the question.
It all comes down to your personal circumstances and the property that you want to buy. Think in terms of the maximum borrowing being around four times your annual salary. It’s important to stress that this is a very general multiplier and you shouldn’t be surprised if the actual amount is different.
What Can You Afford To Repay?
A mortgage is a long-term commitment that you will have to pay off every month over a number of years.
When you apply to a lender for a mortgage, they will ask a lot of detailed questions about your earnings, savings, and outgoings so that they can be sure their money is safe and that you are able to meet the monthly repayments.
Make a list of all your monthly expenditures. Include everything, including your phone, gym membership, fuel costs, childcare, groceries, socializing, clothes, and so on. Also, include any savings and debts you have.
As well as assessing your financial position, a lender will look closely at your credit rating. Even something as seemingly innocuous as a missed credit card payment months ago could mean that they won’t consider you for a mortgage. Check your credit rating, and have any errors corrected before you try to get a mortgage, to give you the best chance of getting approved.
For more on this topic, check out the full Family Home collection