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All about: First time mortgages

First-time mortgage home loan buyers face an uphill. They are about to get indebted in an uncertain economy, and are unsure of how different mortgage lenders will treat their application.

Qualifying criteria

You must be at least 18 years old to get a mortgage loan and 25 years old for a buy-to-let mortgage. If mortgage repayments continue after you cross 65 years, then the assessment gets tough. All mortgages must end before the borrower reaches 75 years. Deposit and interest rates
The lender will typically require you to put up a 10% deposit. If the property you are buying is valued at £150,000, then you need £15,000 in savings. The higher your deposit, the lower the mortgage rates of interest. Credit history
The mortgage company will ask for your permission to check your credit records and defaults can affect your loan-getting chances. How much can you borrow?
Your income and your financial commitments determine your borrowing capacity. Keep all information (certificates, loan agreements, etc.) ready when you approach the lender.

Choosing a mortgage scheme

Fixed versus variable rate of interest
A fixed rate of interest stays fixed for a fixed period of time. You will get an option to choose the period depending on your deposit size. Any changes to the bank of England’s monetary policy will not impact mortgages with fixed interest rates – so long your payments are made on time. The longer the fixed period, the higher the interest rate. The variable rate changes as per changes effected by the Bank of England. If you are expecting the rate to move up, go for a fixed rate. If you are expecting the rate to move down, go for a variable rate. Regular repayment versus interest only versus part interest
Regular repayment covers both principal and monthly repayments. Interest-only schemes allow the borrower to pay the interest in monthly instalments and then repay the principal in a lump-sum. A part interest scheme allows borrowers to mix the regular repayment and interest-only schemes. The lender will ask you for a plan and require you to stick to it when you opt for an interest-only mortgage. Fee versus no fee A higher fee gets you a lower initial interest rate while low cost mortgages with low or no fee will make you pay a higher initial rate. You can choose to pay the fee or club it with your loan, in which case interest will be charged. What happens after the application is made: After you apply for a mortgage, your application is processed. The property is valued, its papers are checked and then the mortgage loan is issued.

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