BUYING a home is the biggest commitment you will ever make in your life. Get this decision right and you are well on the way to laying down solid financial foundations.
Most people their home with a mortgage. A mortgage is the longest financial commitment you will ever make, typically extending over 25 years of your life.
However, the mortgage maze has never been more complicated. Over the past five years, the market has undergone a massive transformation - new players have taken their place on the financial scene and new types of mortgage present an increasing choice for home loan-seekers.
Thankfully, the day when hopeful borrowers had to queue outside a local building society for a loan have long gone. But in place of queues there is now almost a mortgage glut. Banks, insurance companies, so-called centralised lenders and other personal finance players are all vying for your business and offering a wide range of loan schemes. Add a thriving remortgage market - where a borrower changes lender to arrange a better deal - and it is no surprise that many people find the mortgage maze a daunting process.
Yet do not despair - obtaining the right mortgage is possible provided that you follow a few basic steps.
Now a lot of people idolise buying that dream home, but the key area to sort out first of all is affordability. There is absolutely no point borrowing more than you can afford. If you do, you may end up with the home of your dreams, but also with recurring financial nightmares while you scramble together enough money every month to meet your mortgage commitment.
Once your chosen lender has valued your ideal and checked out your means, it will make an offer which will probably be no higher than three or four times your income plus the value of a partner's income. That leaves you to pay the deposit, which should be at least 10% of the property value, otherwise the lender is likely to penalise you by charging an additional lending fee to cover its risk.
If you can pay 25% or more of the value you are more likely to secure a good deal, but beware of any hidden charges that might cancel out benefits. Payments for a lender's property valuation, non-returnable booking fees for limited-offer products, arrangement fees on fixed and capped-rate mortgages and administrative charges for checking your insurance cover are not uncommon.
For anyone choosing a
mortgage either for the first time or because of a wish to switch, minimize the risks and efficiently use your resources to fulfill your financial goals by doing finance comparison for each step of your
personal finance management.
