Traditionally, you went to your building society for a mortgage and there was one rate. This has now all changed. Have you got an "Agreement in principle" (AIP) from a lender? You will need to get this as the estate agent through whom you view properties will take you far more seriously than someone who doesn't have an "AIP".
A guide to a mortgage minefield
Buying and selling a home is said to be one of the most stressful
events of your life. It is certainly likely to the most expensive.
And deciding which is the right mortgage deal is not easy. It is not
just working out if you can afford the monthly payments - you have
to be sure that the rate you are being offered is right for you -
even if your circumstances change. And that can be difficult.
Some of the best rates have conditions which can make them less attractive
longer-term.
This is our step by step guide to working it out.
Now you've found a dream home, can you afford it?
Even before you go for a loan, you can do simple sums to work out
how much you can afford.
First, you need to ask yourself two
basic questions
1. How much deposit i.e. cash down payment can you raise?
2. What is your single or joint income including any bonuses?
When you have this information:
•
Ask your Mortgage Adviser to select two or three lenders and
provide them with this information, comparing how much they
will let you borrow
•
Request a written agreement in principle that confirms this
amount - this shows the seller and their agent that your intentions
are serious
•
You are now ready to make a realistic offer
The deposit
•
Most lenders require a deposit of at least 5%, although a
few offer 100% mortgages
•
The more your put down as a deposit the easier it will be to afford the loan - and you will have the choice of better rates
•
If you cannot raise the money yourself, don't forget to ask your family
How much can you borrow?
Salary earners paying PAYE:
•
Most lenders lend you at least three times your gross annual
income (including bonuses)
•
For a joint application, you can expect to be offered two and a half to three times both your incomes; or three to four times the income of the highest earner plus that of the other
applicant
•
With current low rates, lenders may be prepared to consider
other earnings or increase income multiples.
Self-employed:
•
Traditionally you had to provide audited accounts for three
years; and rates could be higher than the standard variable
•
In today's climate you may find self-certification, supported
by your accountant, will be accepted
•
To obtain the best rates you need specialist advice
•
More high street lenders are willing to offer competitive rates to the self-employed (with the right track record) - so make sure your adviser does the shopping around.
