Published on July 11th, 2016 | by Martin Clancy
Being Mortgage Ready
If you’re thinking of buying your first home, then you’re probably wondering about being mortgage ready. For many first time buyers, a mortgage is the determining factor as to whether or not a house is feasible.
We’ve come up with some advice so that you can be as mortgage ready as possible in order to make your dream home a reality. Check out our Daft.ie Mortgage Centre.
Be aware that mortgage rates can go up and down
The interest rate on your mortgage can change throughout the term of repayment so make sure you know exactly what type of interest you will be repaying. The three main interest rate options available are – variable rate, fixed rate and split rate.
Variable rates offer the most flexibility as they allow you to pay extra off your mortgage, extend your mortgage term or top up your mortgage. However, these rates can rise or fall meaning that your mortgage repayments could go up or down during the term of your loan. Fixed rates are commonly available over one to three years. The repayments cannot increase or decrease for the set period of time which means that you could miss out on lower interest rates resulting in lower repayments. Split rates take a portion of your mortgage repayments on a fixed rate of interest and the other portion is left to rise and fall with the variable interest rates.
You want to get the best deal for your investment with the lowest interest rate possible in order to make it easier for you to repay the loan. Check and compare all mortgages available to you and choose the one that is best suited to you and the easiest for you to repay. Try and fix the mortgage if reasonable fixed rates are available.
Include insurance and other risk protection in your budget. Without protection against risks you could be left with a large mortgage to repay and no way of repaying it. This is why you should determine how much you need to borrow and only borrow what you can afford to repay.Mortgage cover insurance will help to repay your mortgage in the event that you fall ill and are unable to work or have been made involuntarily redundant
Ability to repay loan
Lenders will look at your credit rating before issuing you with a mortgage. They will also look at your bank statements, loan record, proof of income, tax records and look for a proof of identity. Make sure to keep your current accounts well maintained by saving regularly and avoiding debt. This will let any mortgage institution see that you have the ability to repay back the loan, making you a desirable client for a mortgage.
Once you know how much you can afford to borrow, you must work out how much you can afford to repay each month. The lower the interest rate, the easier it will be for you to make repayments. If you can afford to repay in bigger instalments than originally agreed, you can shorten the repayment scheme by paying a bit extra back every month. This in turn will reduce the lent of the overall repayment meaning you will clear the mortgage sooner than originally anticipated.
Many banks and lending institutions offer deals with new mortgages such as 2% cash-back on any new mortgage drawn. With deals like this, it’s easier for a new home may become a reality. These schemes were set up in order to give cash back to help customers with the costs related to house purchases. So far in 2016 there has been an 8.7% increase in mortgage approvals, with 53% of these mortgages for first time buyers and 29% for mover purchases. The overall value of mortgages has also increased as banks and lending institutions are issuing bigger mortgages. This is all good news for anyone in the market for buying a new home. Check out our Daft.ie Mortgage Centre.