You’ve reached that stage where you’re finally ready to become a homeowner. So what now?
As a first-time buyer, you have plenty of flexibility and may find that any of the types of mortgage we’ve looked at above might be most suitable for you. This choice in itself can be intimidating, but if you do your research or speak to a mortgage broker, you’ll find the one that’s right for you.
The costs for first-time homeowners
When you first apply for a mortgage, you’ll have to go through a series of checks to make sure you can afford to take it on. You’ll need to prove your income and detail any outgoings, as well as undergo a ‘stress test’ to assess whether you’d be able to keep up your repayments if your circumstances changed.
Your deposit could represent anything from 5% of the value of the property – though the more you have, the cheaper your mortgage is likely to be. There are all sorts of other charges you’ll need to take into account, too, including solicitor’s fees, valuation costs, and insurance payments.
The good news? You won’t need to pay any stamp duty – a tax which goes towards the verification of legal contracts – on the first £300,000 of any property worth up to £500,000.
How Trussle can help first-time buyers
With so many mortgages to choose from, it can be difficult to know where to turn. But Trussle exists to make the process a whole lot easier.
We’ll be able to recommend the right mortgage for you – searching 11,000 deals from over 90 lenders – and keep you in the loop about your application from your personal Trussle timeline.
Once you’ve secured a mortgage, our monitoring service will keep tabs on it and we’ll notify you immediately if there’s a more suitable deal out there at any point in future, so you’re never paying more than you should.
So you already have a mortgage, and you think there might be a better deal out there for the same property. Well then, it might be time to remortgage.
You can look at a new deal with the same lender, or look elsewhere altogether. And the more of your existing mortgage capital you’ve paid off, the more competitive deals you’ll qualify for. But as with the first time you buy, there are plenty of things out there to catch you by surprise if you’re not armed with the information you need.
Most people remortgage their home to secure a more favourable deal. Most mortgages come with introductory periods, and once these have expired, it usually doesn’t make financial sense to stick with them since you’ll end up on a generally higher-interest Standard Variable Rate (SVR).
For some people, it’s simply a chance to:
- Move to a new property
- Protect against possible future rate increases
- Raise money for home improvements
- Release equity from the property
- Consolidate their debts
You should be able to switch deals whenever it makes sense to do so, though some lenders may charge you an early repayment fee to do so. You’ll need all the information you used when you originally applied for a mortgage – including proof of income and details of outgoings.
How Trussle can help with your remortgage
Rather than spend your time speaking with a number of lenders to compare their mortgage products against each other, we’ll do the legwork for you.
Simply provide your details by completing your Trussle profile – when your mortgage started, for example, and what type it is – and we’ll scour the market of over 11,000 deals and 90 lenders to find the most suitable deal for you.
You can talk to our advisers by live-chat, email, or over the phone if you wish, and keep track of your application from start to finish from your Trussle timeline.
If you’re looking to rent out your property, you’ll need a buy-to-let (BTL) mortgage.
Most of the big banks offer BTL mortgages, as do some specialist lenders, and the amount they’ll offer you will be linked to the amount of rental income your property is expected to earn. Lenders complete a rental stress test on the monthly rental income to determine how much they can lend you, and will generally require rental income to be 125% of your monthly mortgage repayments, but some lenders have recently increased this to as much as 145%.
How do BTL mortgages differ from residential mortgages?
On the whole, the rules around BTL mortgages are similar to residential mortgages. But there are a few key differences you’ll need to be aware of:
- The minimum deposit is higher. Most lenders will ask for a minimum 25% deposit, but this will depend on a rental stress test. There are a handful of lenders who will look at a lower deposit.
- Fees can be higher. You can normally choose to pay these fees upfront or add them to the loan, which will incur interest.
- Interest-only mortgages are more popular. For landlords looking to generate an income, interest-only mortgages keep monthly payments low and can maximise returns.
Am I eligible for a BTL mortgage?
To secure a BTL mortgage, you’ll need to be over 18, earning more than £25,000 per annum (a few lenders will ask for less than this, and some don’t have a minimum requirement at all), and you’ll need to pass a credit check. The type of property you choose will also affect the lender’s decision.
Your loan-to-value (LTV) ratio will come into play, too. An LTV ratio is a lender’s way of measuring the risk involved in the mortgage, and while it’s not the only factor that will determine whether you secure a loan, it is a key metric.
It’s calculated by dividing the amount of money you can borrow by the overall value of the property. For example, if you take on a £75,000 mortgage to pay for property worth £100,000, your LTV ratio would be 75%.
Buy-to-let lenders generally offer a maximum LTV ratio of 75% (a few offer higher). A higher LTV ratio doesn’t exclude you from borrowing money, but the cost of the loan will increase in kind. So a borrower with an LTV ratio of 85% may have their mortgage approved, but they’ll usually pay more than someone with a LTV ratio of 75% for an equivalent property.