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Are you in the market for a new home? If so, you’ll likely need to take out a mortgage to finance the purchase. When shopping around for a mortgage, it’s important to compare rates and terms from different lenders. You may be surprised at how much difference there can be in what different lenders are offering. But don’t worry – getting quotes is easy with today’s technology. You can get started by filling out a quick form on our website. We’ll connect you with several reputable lenders who will compete for your business. So, compare deals today by calling us for a free quote.

What is a Residential Purchase?

A residential purchase is when an individual or a couple by a property to reside in. This is usually related to first time buyers that are going on the property ladder. It is also when people buy their next house for reasons such as bigger families, downsizing etc.

What to do next?

We have put together a few important points be for you to consider before applying a mortgage.

How much can I borrow?

You can borrow between 3x and 4.5x of your annual income for a mortgage. If you’re applying for a mortgage in conjunction, multiply your joint income by four (although some lenders may let you borrow more). Here are some measures to take if you want to figure out how much you can borrow. Use a mortgage calculator (Click here)

Mortgage lenders have been significantly more selective in who they lend to since the 2008 financial crisis. In addition, lenders will now undertake affordability checks on you before lending you money to verify that you can pay it back on time.  A mortgage calculator will help you to understand what is available to you.

Examine your credit report.
Affordability is determined by thoroughly examining your income, outgoings, and overall debt. They’ll also look over your credit report. Lenders also want to know that you’ll be able to make the payments even if interest rates rise by 4% above the Bank of England base rate. This is referred to as stress testing. Furthermore, you may be eligible to borrow the maximum amount if you already have an existing account with the lender or have a substantial deposit. 

Obtain an agreement in principle
In principle, you can get an agreement to receive a more precise maximum mortgage figure. While an agreement in principle isn’t the same as a formal mortgage offer, it is a rough valuation of how much a lender could be willing to offer you.

How much deposit will I need for residential mortgages?

Consider these two things when calculating how much you’ll need to save for your mortgage deposit: typical home prices and monthly repayment costs. In most circumstances, you’ll need a 5 percent down payment to acquire a mortgage, which means you’ll need a 95 percent loan. The loan-to-value ratio, or LTV, is the ratio of the loan size to the property value. A 95 percent loan is also a 95 percent loan-to-value (LTV) mortgage. If you save more and can put down a 10, 15, or 20% deposit, you’ll have a better likelihood of being accepted for a lower-cost mortgage. The lowest mortgages are usually only available if you have a substantial deposit or a lot of equity if you’re re-mortgaging or transferring. 

Stamp duty costs

In the United Kingdom, there are extra stamp duty laws, such as increased rates for additional properties or significant exemptions for first time buyers. Please use our stamp duty calculator to see how much you will have to pay. In the United Kingdom, there are extra stamp duty laws, such as increased rates for additional properties and various rates in different countries. In addition, different regulations apply in specific situations, such as replacing a primary residence, when corporate bodies or shared ownership properties are involved, when buying six or more properties in one transaction, for multiple transfers between the same purchasers and sellers, and many more. Stamp duty is a complicated subject, so it’s advisable to seek advice from an expert to ascertain the exact rate applied to any property acquisition.

Is it cheaper to rent or buy a house?

In most cases, it appears that renting is the most cost-effective option. However, this isn’t always the case. Several lifestyle concerns, such as whether you desire freedom or stability, your job aspirations, and whether you want a location to call your own genuinely, can all influence your selection.

Here are some important factors that will influence your decision.

Decide the duration in which you will stay in the same location

Buying a home may make sense if you are positive you will stay in it for at least five years. That’s because it could be an excellent fit both emotionally and financially, as you can add personal touches to make your house seem truly yours.

Calculate the difference between renting and buying-

Because of the upfront fees, renting can often be less expensive than buying a home. This includes a down payment, other mortgage charges, moving costs, improvements, and other property upkeep activities. However,  that’s not to mean you should jump into homeownership straight now away. If you’re focused on owning a home,  it’s OK to rent for a few years, save up, and then buy. The cost savings of becoming a homeowner assume that you would stay in your home for a long time and may not include maintenance costs. However, even with home upkeep costs, the savings can be significant if you pay off your mortgage and continue to live in your home.

Another aspect to consider are the differences between repayment and interest only, this will also help you decide if you should rent or buy.  

Repayment mortgages benefits are:

  • Because the amount you owe reduces each month, you pay less interest overall. Later in the mortgage’s term, a larger portion of each payment pays off the principal. 
  • Lesser interest rates later in the mortgage term because your outstanding balance will be smaller, and you can negotiate better bargains. 
  • If you make all your mortgage payments, you will own your home after the term. 

The monthly installments will be greater than with an interest-only mortgage, so make sure you can afford them.

Interest-only mortgages benefits are: 

  • Because they solely cover the interest, the monthly payments are lower. 
  • You are in charge of your finance. For example, you can select whether to save money or to put down towards your mortgage.

Most borrowers are not suitable for interest-only mortgages. Only take one out if you understand the risks and have a repayment strategy in place to save enough money by the end of the term.

Please use all the factors above when making a decision about renting or buying. If you need further help, please fill free to contact us.