Are you looking to get your foot onto the property ladder? This could be quite stressful and full of anxiety when you are taking out a mortgage for the first time. This is the largest debt, which is undoubtedly complicated and ties you to payments for a very long period of time. Applying for a mortgage as a first-time buyer is not so complicated, but there are things you need to be aware of.

There are various types of mortgages. You must understand how they work. For instance, fixed-rate mortgages and standard variable-rate mortgages. Most of the first-time buyers are not aware of the fact that first-rate mortgages come with a short period of time. They last for two, three, and five years, depending on the policy of the lender and the size of the mortgage you are taking out. But as soon as this fixed-rate period comes to an end, you are put on a standard variable interest deal.

What is the difference between fixed-rate and standard variable mortgages?

When you take out a mortgage, at first your lender will put you on a fixed-rate deal. It means you will have to pay down a fixed sum of money every month until the fixed period comes to an end. But as soon as the fixed period expires, you will be put on a standard variable interest-rate deal.

Interest rates are set by the base rate by the Bank of England. You will see no changes in your instalment size as long as you are on a fixed-interest period deal. However, interest rates keep changing as the base rate by the Bank of England changes when you are on a standard variable deal.

Smart mortgage tips for first-time buyers

Here are some mortgage tips for first-time buyers:

• Consider whether a mortgage is a suitable option for you

Mortgages are really expensive, even if your credit score is good. They will tie you to payments for a very long period of time, and it is quite challenging to become certain of your repayment capacity. Chances are you lose your job, or you part ways with your partner, or you suffer financially for any other reason. It is your responsibility to ensure that you will have enough money in the future to keep up with payments, come what may.

There are standard variable mortgages and tracker mortgages. Interest rates for the former are set by your lender. It is not necessary that your lender will reduce interest rates when the base rate drops, but tracker mortgage interest rates are always in agreement with the base rate.

It is an important aspect you must know while choosing first-time buyer mortgages in the UK. You must know the rudiments of mortgages so you do not end up with ugly surprises. Do some research, and if you cannot get hold of sufficient information, consult a broker. They would walk you through the entire mortgage application process. While it will cost you some fees, it is worthwhile.

• Arrange a larger deposit

In order to qualify for a mortgage, you will need to arrange a larger deposit. You must have a 10% deposit of the total market price of your house. However, it is enjoined that you arrange a larger deposit. Try to make it up to 20% even if your credit score is up to snuff. This is because it will increase your chances of qualifying for lower interest rates.

If your credit rating is not so impressive, it is compulsory to have a larger deposit of up to 20%. In order to arrange a bigger deposit, you will have to start saving money sooner rather than later.

• Avoid having any debt obligations

Whether you are taking out a mortgage from a broker like ShineMortgages or from a lender, you must ensure that you do not owe any debt at the time of applying for a mortgage. Many people do not consider debt a problem as long as they have been paying it on time. Even though you have been clearing your dues on time, you should avoid indebtedness at the time of mortgage application.

A mortgage lender will carefully peruse your credit report. They will check how much debt you owe. Do not forget that a high debt-to-income ratio is not regarded by them. If you have utilized a high credit card balance, you will be perceived as a risky borrower, even though you have paid off the balance in full on time.

Your credit history must not reflect any outstanding debt for at least six months before you apply for a mortgage. It is a good sign if you have been debt-free for a year. This is because it proves you can manage your finances without relying on debt.

• Do not forget to take into account other costs

At the time of taking out a mortgage, you should consider the total cost, not just interest rates. There are various costs added to a mortgage that you must consider to decide whether it fits your budget. Such fees include:

• Arrangement fees – this fee is charged at the time of taking out a mortgage. It varies by lender. It is generally up to £1,000.
• Valuation fees – your lender will value your property, and therefore, valuation fees will be charged. Such fees vary between £300 and £500.
• Legal fees are also charged. This covers the cost of all legal work. You should have a budget of up to £2,000 for this.

You should always bear in mind that the bifurcation of fees will be given in the agreement. You will have a cooling-off period of up to 14 days to decide whether or not to sign the deal. If you think you cannot repay your mortgage, you should reject the offer. Try to get agreement in principle from a couple of lenders to choose the best deal.

Summing up

If you are looking to take out a mortgage as a first-time buyer, you should consider the suitability of a mortgage application. Avoid having any debt at the time of taking out a mortgage and compare costs, so you do not fall into a mortgage trap.