Seen as one of the lifetime milestones, often thrown in the same sentence as “marriage” and “children”. But since 1986 we are obtaining less than half as many mortgages. This can be attributed, in part, to unsuccessful applications in ever-increasingly tough economic times where lenders are cautious and therefore more scrutinous. But on the other hand; with the introduction of tighter regulations, renting can often seem like the sensible option, especially amongst first time buyers.
Indeed, the market is saturated with homeowners aged over 50, first-time buyers, and the self-employed who are finding it more and more difficult to find approval, particularly from banks. The first necessary step is to write out a budget for prospective options, take a sample area and by calling estate agents and landlords, find out the rent prices of several properties. Then, either by mortgage comparison websites, bank manager, or personal financial advisor, seek out potential mortgage deals and rates.
There are different types of mortgages and, like any other product it is worth shopping around for the best deal. This can be difficult as not all mortgage types will be right for you, and they will certainly behave differently over time. At a glance, a fixed rate mortgage is good in the short term and expensive in the long term as the interest rate does not move, regardless of market behaviour, and there tend to be large early repayment charges. A mortgage with a capped rate will prevent the interest rate from rising above the preset cap. Whilst a tracker rate is linked to a public interest rate, this can be a bit of a gamble and certainly makes for difficult budgeting.
Only by scrutinising the outset costs and projecting 12 months, 24 months, 5 years into the future might it become clear which path is best for you. It is important to take as much into consideration as possible – sensible predictions of the movement of interest rates, and property market prices. The property market is a notoriously difficult investment opportunity, do you want to buy a house to live in or to sell at profit and move on from.
All these considerations taken into account, a mortgage can still seem a daunting prospect, in particular the meeting with the bank (or other institution, but probably bank). Obtain a copy of your credit report, prepare yourself thoroughly, seek to minimise all other debts prior to making the application, relax, smile, be confident, and ask any questions you might have. How can you make yourself seem like a good investment opportunity?
Mortgage might roughly translate from French as “dead pledge”, but don’t be overfaced. When thoroughly researched and carefully planned, a mortgage, if right for you, isn’t something to be put off by.