Rising house prices in the UK have made it very difficult for first time buyers in the UK. The ratio of house price to earnings has risen significantly. With average house prices rising to over £100,000 many feel it is hopeless to even try and be able to buy. However despite the inflated house prices it still makes economic sense to try and buy a house if at all possible. The good news is that in recent years the deregulated mortgage industry has become increasingly competitive and flexible in offering different types of mortgages which may enable first time buyers to get onto the property ladder. These are some of the approaches you can take to try and get your first mortgage.
Tips for Getting First Time Mortgage
- Help from Parents / families. Often if you can secure a reasonable deposit, then your chances of getting a good mortgage increase significantly. This is especially true if you wish to go down the path of self certification mortgages. You could suggest a loan not as a gift but as a good investment. In return for a loan you can give a % of your future house price rise to your parents. Often when there is an agreement like this people feel happier both giving and receiving a loan.
- Interest Only Mortgages. These are controversial because they only pay the interest on the loan and not any capital repayment. This means monthly payments are cheaper. However it means you don’t pay anything to repay the capital, after 30 years you will still owe the same amount. However interest only mortgages are accounting for an increasing % of new mortgages approved. They may work if you can discipline yourself to an independent saving scheme, or if you hope to get a much higher salary in the future.
- Buy with other people. Another increasingly important mechanism is for people to find others wishing to get on the property ladder. These are often known as Joint Mortgages By sharing the purchase price it enables you to get a bigger mortgage. The only problem is that shared ownership can create difficulties later, especially if don’t know the person very well.
- Self Certification mortgages. Self certification mortgages are designed for those who have difficulty proving their income. This is often used by self employed people. Usually there is less stringent testing of incomes, allowing people to get bigger mortgages than they would from conventional mortgages
- Don’t be discouraged if you get rejected by the well known mortgage lenders. There are many mortgage deals available it may just be a question of looking around.
- Consider moving. A bit drastic but if you really want to buy a house, moving location may be an option to consider. Also it may prove to be a good financial investment as recently house prices have been rising more rapidly in places like Wales and Northern Ireland than London.
- Fixed Rate mortgage. Getting a fixed rate mortgage insures you against fluctuations in the interest rate and makes it easier to plan mortgage payments
If the alternative is paying rent, getting a mortgage is definitely worth trying to do. However it is always important to remember that your home is at risk of repossession if you don’t meet your monthly mortgage payments. Make sure your monthly payments are genuinely affordable. Spending money on a mortgage is not the only important thing in life!