THE purchase of your first home can be a stressful experience and, with the UK's mortgage crisis deepening almost daily, it is becoming increasingly difficult to get on the property ladder.
The biggest problem now is that lenders will not lend more than 100 per cent of the value of the property. If you have a deposit – preferably 20 per cent, but sometimes 10 per cent – there is more likelihood of obtaining a mortgage.
Most lenders a
re taking a tough stance to protect themselves against potential losses and have tightened up on how much they will offer. Affordability is now the main concern, rather than a strict multiple of salary. Lenders will now consider the cost of your other loans and outgoings before deciding on the maximum amount you can borrow. They will also carry out a credit check.
It is important to shop around to source a competitive interest rate. Most lenders have recently withdrawn their best rates and have increased their arrangement fees. These secure a product and can now be between £1,000 and £2,000, compared with £300 to £500 a few years ago. It is not always the lowest interest rate that will be the least expensive over the mortgage term.
To help with affordability, many first-time buyers are asking for an "interest only" mortgage instead of repayment.
You must understand, if taking an interest only mortgage, there is no capital being repaid, which can cause problems in the future. It is very important to take advice from an independent adviser to understand the consequences of buying your first home.
• Craig Laing is an independent financial adviser at Henderson Loggie Financial Services.
The full article contains 293 words and appears in The Scotsman newspaper.
