First Time Buyer Mortgages

As a first time homebuyer, one of the most important considerations you will need to make is what mortgage to use. This is even more important than choosing your home, as your mortgage is a long-term financial agreement that will be a part of your life for as long as the next thirty years. You need to know that you can afford the monthly payments. You also need to know all of the ins and outs of first time buyer mortgages.

What Is a Mortgage?

A mortgage is a loan you use to buy a home. In reality, when you purchase a home with a mortgage, you do not own the home until the mortgage is completely paid. This means that the bank effectively owns your home. However, the home’s mortgage is a good investment, because each month as you pay on your mortgage you are building equity, or value, in your home.

What to Watch For

There are many dangerous traps in the world of first time buyer mortgages. Many times lenders try to trap unsuspecting homebuyers into arrangements where they will pay high fees if they change mortgages. Be sure to watch out for any mortgage that traps you into an agreement for more than two or three years.

Take some time to shop around and learn about the different fees that are charged on mortgages. Avoid applying for the first mortgage you are offered. You could end up paying thousands of pounds in needless fees and charges. Ask questions about everything, and make sure you know what you are agreeing to when you sign the mortgage document.

High set-up and valuation fees are part of a common trap that new borrowers fall into, and sometimes these fees are hidden well in the mortgage documentation. Read everything and ask for a thorough explanation of anything you don’t understand. You may find that an independent mortgage broker can help you understand the mortgage agreement.

Remember, most lenders are willing to lend you three times your annual salary. You may be able to find lenders that will lend you four times your salary, if your credit score is quite high. This will help you know how much of a home you can actually afford.

Save for the Down Payment

One way to avoid high fees on your mortgage is to save for the down payment on your home. If you can put down 20% or more of the value of your home, you will avoid paying mortgage indemnity guarantee. Also, putting more than 20% down on the property will save you money. You will pay less in interest fees over the life of the mortgage, and your monthly payment will be lower. Just be sure that you save to use as you move into the new home.