Mortgages

Tips for getting your first mortgage

By

Zoopla

By
Zoopla

Does the prospect of getting your first mortgage fill you with dread? Here are some tips to help you through the process.

Applying for a mortgage for the first time so you can buy the flat or house you’ve set your heart on can feel like a huge step. 

The process can often be stressful – with a lot of hoops to jump through – and tough affordability criteria means there’s a risk you won’t get accepted. 

Add to that a confusing array of products and a lot of jargon, and you may be feeling more than a little overwhelmed.

But there’s no need to panic. Here we give you some tips to help you get accepted for the mortgage you need to purchase your dream home. 

Build a deposit

As a first-time buyer, the key is to amass the largest deposit you possibly can before you even think about applying for a mortgage. 

Generally speaking, you will need a deposit of at least 10% of the purchase price, although some lenders may be willing to lend to borrowers with smaller deposit of just 5%. See Help to Buy schemes here

The more competitive rates only really start kicking in once you have a deposit of 20-25% – so the harder you save, the better.

Do the maths

Once you’ve found the place you want to move to, you need to think about house prices – and what this will mean for the loan-to-value (LTV). 

The LTV is the size of the mortgage compared to how much your proposed new home is worth. 

The lower the LTV, the cheaper the mortgage tends to be.

It is worth using a mortgage calculator to help you work out what your monthly repayments could be.

This can help you gauge whether the property you want to buy is actually affordable. 

Read more at How to work out your mortgage repayment

Choosing between a variable-rate and a fixed-rate mortgage

Mortgages come in various forms – including fixed-rate and variable-rate deals.

With a fix, the rate stays the same for the agreed term of the deal, irrespective of what happens in the mortgage market. 

This gives you the peace of mind of knowing your mortgage repayments won’t change and makes budgeting a lot easier. 

By contrast, a variable-rate deal – such as a tracker – will usually go up and down with the Bank of England base rate. This means that if the base rate rises, your monthly repayments will go up too. 

If you don’t think you’ll be able to afford higher monthly repayments as and when the base rate goes up, you should opt for the security of a fix. 

Read more at: Your mortgage: should you fix or track?

Decide how long to fix

If you do decide to plump for a fix, you then need to think about how long to fix.

Historically, borrowers have tended to go for shorter-term fixes of two, three or five years, but with rates on longer-term fixes getting more competitive, you may be tempted by the idea of locking in for the long haul.

The longer the fixed term, the longer your monthly repayments will stay the same.

But while this may sound appealing, you need to be aware that if you do need to get out during that time, you could face hefty early repayment charges. 

Read more at: Is it time to go for a long-term fixed-rate mortgage?

Don’t forget mortgage fees

When applying for a mortgage, you need to be aware that many deals will come with arrangement fees. These are costs charged by the lender for setting up the deal. 

As a borrower, you need to be aware that some of the very cheapest mortgage rates come with pretty hefty costs. 

With this in mind, you need to look beyond the ‘headline rate’ and factor the fee into the overall cost of the loan. 

Also note that while many products allow you to add the fees to the deal, this then means you end up paying more in the long run.

Given that mortgage fees can soon mount up, it’s worth checking out the fee-free options on the market. 

The key before signing up to any deal is to do your sums. 

Be sure to factor in all the costs

Even if you do end up going for a fee-free mortgage deal, there are still costs you will have to fork out for.

As all these costs can hit your wallet hard, you need to budget carefully in advance of your move.

These include:

  •       Legal fees
  •       Survey and valuation fees
  •       Removals costs
  •       Buildings and contents insurance
  •       Furniture and decoration 

On the plus side, as a first-time buyer, you don’t have to pay stamp duty

Read more on whether you qualify for stamp duty relief here.

Think about the term

The mortgage term refers to the length over which you have opted to repay your home loan. Typically, mortgages last for 25 years.

That said, one way to make your monthly payments more affordable is by opting for an extended term – some lenders will allow a term of up to 35 years. 

But think carefully before agreeing to a longer term, as this means it will take you longer to clear the debt, plus you’ll pay more in interest in total. 

Check your credit score

Lenders will use your credit score to decide whether to lend you money.

They will lend the most – and offer the best deals – to those with a near-perfect score.

As a borrower, you need to check your credit file and see it is accurate and up-to-date. 

You can check your report with a credit reference agency, such as Experian and Equifax. You can compare services and packages here.

If there are any errors, you should ask for these to be corrected. 

Having done this, you should then take steps to boost your credit score. 

Tips include:

  •       Getting registered on the electoral roll
  •       Having a landline number
  •       Paying all your bills on time
  •       Paying off debts
  •       Closing unused accounts 

For more tips, read: Important steps to improve your credit score

Get your paperwork in order

A mortgage application involves a lot of paperwork, so you need to be organised. 

The best approach is to plan ahead and gather all the necessary documents together before you apply. 

Things you will need include:

  •       Around six months’ worth of bank statements
  •       Your payslips
  •       Your latest P60 

If you are self-employed, the requirements will be slightly different:

  •       Ideally, you need to show three years of accounts – though two may suffice
  •       If you don’t have this, two or three years’ of tax returns may be the next best option 

Do your homework

When looking for a mortgage, it’s vital that you shop around to find the best deal. 

You can compare thousands of mortgages with Zoopla’s partner, uSwitch.com 

Seek help from a broker

If you are struggling with the mortgage application process – or finding it hard to find the right deal for your needs – it may be worth seeking help from an independent broker

They will scour the whole market for you, and offer expert opinion on the best home loan for you in terms of rate – and fees – as well as the likelihood of your application being accepted.

They can also identify and target lenders that will understand your particular circumstances. 

In addition, a broker will hold your hand through the application process, making the whole thing a lot less stressful.

You might also be interested in...

Start your MovePlanner

Moving soon? Move smarter with our interactive checklist, the Zoopla MovePlanner.

  • Save money
  • Save time
  • Reduce stress