This is a collaborative post.
There’s plenty to consider as a first-time buyer. Despite the challenging financial conditions illustrated by the cost-of-living crisis, now could still be a good time to buy a house. After rising by an average of £55,551 in just 24 months, house prices are projected to stabilise this year. However, if interest rates continue to rise, this could lower the demand for mortgages, making it easier to find a better deal. If you think now’s the time to purchase a house, then it’s worth reading on to find out the essential considerations when buying a mortgage.
Agreement in principle
If you’re wondering about whether you could afford the mortgage attached to a house, you could explore an agreement in principle. An agreement in principle allows you to work with a lender to find out how much you could borrow before you actually apply for the mortgage. This can allow you to budget effectively and assess whether you could afford to buy a home.
Loan to value
You’ll also need to consider the loan to value (LTV) when buying a mortgage. Lenders use this process to determine the size of the deposit you’ll need to pay. Typically, loan assessments with high LTV ratios are considered higher risk loans. As a result, the higher your LTV ratio, the higher the deposit you’ll pay and the higher the rate of interest you’ll pay on your loan too. If you want a lower LTV ratio, then you can achieve this by paying a higher down payment on the house.
Conveyancing is the essential legal component of buying a mortgage. A conveyancing solicitor will enact the legal process of transferring the property from one party to another. They’ll often gather documents from both sides, explore planning permission and flag up any issues with the property. Usually, the fees will cost around £2000, but it’s worth negotiating a fixed rate upfront. By working with trusted conveyancing solicitors the process of buying a mortgage should be much smoother.
The current market
Finally, if you’ve picked out a house you like for a mortgage, it’s worth analysing projections on the home’s value. This can be achieved partially by examining comparable properties in the same area. Knowing whether your property value is likely to increase or decrease can help you avoid negative equity. At the same time, it’s worth checking current interest rates to see how this will impact your mortgage repayment rate.
Buying a mortgage can be a stressful time. But by following the advice above, you should be all set to navigate this complex process with peace of mind.