First-Time Home Buyers Guide: The Basics Of A Mortgage

Mortgages are complicated things. They can be difficult to understand, yet when you sign up for one you are really making a long-term commitment. You really should, therefore, make every effort to really understand exactly what you are signing yourself up for. Read through our guide covering the basics of a mortgage and see if we can help you understand ready for your first house purchase.

Why do home buyers use mortgages?

Mortgages allow you to purchase a property and spread the cost over a large number of years, usually 25. This makes the payments for a property extremely affordable, to help home ownership become something that many out there can achieve. Mortgages are always secured on your property. This means that if you fail to make repayments, your home will be repossessed by your mortgage provider.

How do I qualify for a mortgage?

Entitlement to mortgages are usually based on earnings as well as on your credit history. The maximum that you can borrow, for instance, is usually 3 x your annual earnings. You don’t necessarily need to have an excellent credit rating to qualify for a mortgage, although to take advantage of the best interest rates you will need to have a good record of paying off debt. Working on your credit score can increase your chances of achieving a favourable mortgage rate, why not increase your chances of finding your dream home by reading our post?

How large should my down payment be?

The maximum amount that you can usually borrow through a mortgage is 90% of the value of the home you are purchasing. This means that you will need a 10% deposit to secure a mortgage. Have a look at mortgages on offer, via a mortgage broker though. to determine exactly how much you will need.

What will my mortgage interest rate be?

This depends entirely on your own personal situation. Your credit score, the amount that you are borrowing, the value of your home and value of your deposit will all determine this. Most mortgages sit around the 4 to 5% interest rate mark.

What will my monthly mortgage payment be?

Your monthly mortgage payment will depend on your interest rate, the amount that you have borrowed and the term length of your mortgage. You can see your monthly mortgage payments when you start to compare mortgages. Just spend some time going through your budget to make sure that you can realistically afford the mortgage payments each month.

How do I qualify for a mortgage?

In order to qualify for a mortgage, you need to be purchasing a property. You can’t borrow money through a mortgage without something to serve as collateral and this should be a property. You are only usually able to borrow 90% of the value of the property and you should be able to demonstrate that you have the earnings to make the minimum monthly payments. When you purchase a property through a mortgage you also need to ensure that the property you purchase has buildings insurance. Every mortgage provider would expect this.