Tips for Getting a Mortgage as a First Time Buyer

Choosing a good property to buy is not easy and being a first time home buyer is even harder because lots of things are new to you. How do you choose a good house? How do you find a good mortgage broker? How do you get a mortgage? You probably don’t have answers to any of these questions. However, there are many resources online that can help you answer these questions, and today in this article, we will provide you with some tips on getting a mortgage as a first time home buyer. These tips will get you started but it is still extremely important to request advice from the experts, in this case, mortgage brokers.

Hiring a good mortgage broker can help you answer the queries you have and guide you through the whole process. If you are based in Melbourne, Australia, check out Blutin Finance. Getting advice from the right people is very important for first-time buyers but here are some important tips that you should bear in mind:

Do Your Research

When applying for your first mortgage, the most important thing you can do is research the topic. What is a mortgage? What can you do with your mortgage? What are your options?

It’s important to know what you’re getting yourself into. A lack of knowledge and understanding could lead to some bad decisions which may do more harm than good in the long run.

Financial security is as much about what you know as it is about what you do.

Understanding your Mortgage

The first step to understanding your mortgage is figuring out which mortgage is right for you.

Do you want a repayment mortgage or an interest-only mortgage? What’s the difference? You need to be able to answer these questions before even beginning your journey to getting a mortgage.

An interest-only mortgage allows you to pay the interest rate each month for the span of the loan. After the mortgage, you would be required to pay the full amount of the loan, whereas a repayment mortgage allows you to pay off the loan each month.

Mortgage Rates

Mortgage rates are another aspect of your loan that needs understanding.

A variable-rate mortgage is a category of mortgage where the interest rate varies according to an external influence. Typically, this type of mortgage is distinguished as either a tracker or a discount mortgage.

A tracker mortgage tracks the base interest rate of a central banking organization and adds a little something on top. A discount mortgage offers a discount to the lender’s standard-variable-rate, although it is subject to a ‘collar’ which means that the interest rate of the loan cannot go below a certain percentage.

Standard-variable-rate mortgages are loans in which the interest rate is set at the lender’s discretion rather than influenced by a central banking authority’s base rate.

Fixed-Rate mortgages are agreements in which the lender sets a base interest rate for the span of the loan. The interest rate will not change during the lifespan of the loan.

There are as many mortgages as there are reasons to take one out. The type that is best for you and your circumstances is out there, you just need to know what it is and how to find it.

Mortgage Features

It is also important to understand that mortgages often come with caveats or special features. Perhaps that promising mortgage you’re looking for has an early repayment charge? Or maybe it’s a flexible mortgage that allows you to vary your repayments as your circumstances change? What’s an offset mortgage?

Can You Afford It?

After doing your research you should feel more comfortable making an informed decision. So, what’s the next step?

Well, the next step is to decide if you can afford to take a mortgage. This is as simple as working out your income and taking away your outgoings, which include living costs, personal expenses, and savings. What is left after this process, are your maximum monthly repayments and the size of your loan?

When working out living costs, it’s important to do so from the perspective of your new home.

Deposit

Once you have a ball-park figure for your overall loan you should be able to work out the ideal figure for your deposit. Typically, the deposit for a first-time borrower is around 5%-10% of your total loan. If you can afford the repayments on a $200,000 loan your deposit will be $10,000-$20,000. However, the deposit may be lower than 5% depending on the type of mortgage you take. Again, knowledge and information are your keys to success. However, there is not an upper limit to what your deposit can be, and traditionally the higher your deposit the better your rate on the mortgage.

Applying for your Mortgage

You’ve done your research, you’ve worked out the ideal monthly repayment for your circumstances, you’ve worked hard and saved up, what’s the last step? Well, go forth and apply.

The process is fairly simple, and you will have an advisor as you move through the steps of getting the mortgage. However, it is important to keep one thing in mind before taking this final step. When vetting individuals for their mortgage a lender will consider your credit history. This is especially true if it’s your first mortgage as you will be seen as a riskier debtor.

Hopefully, you have learned something new from this article. It can be stressful when you realize that getting a mortgage is not as easy as you first thought but after you get some experience, it becomes much easier for you when you buy your second or third property. If you know someone who has applied for a mortgage before, ask them for advice but don’t rely on your friends because regulations and advice can change regularly so always go to the expert (mortgage brokers) for the most up to date advice. Finally, congratulations on getting one step closer to becoming a homeowner.