Essentials of Borrowing
Mortgage Tips For Nervous Buyers.
HERE'S A BIG TIP: ALWAYS NEGOTIATE. The first quote you're offered is not the bottom line. It's easier to get a better deal from one lender if you've been offered a good one previously by another. You can use this as ammunition when speaking to the loan officer. You'll likely be dealing with a call centre or a junior loan officer initially. You can say you're definitely interested, but want a better deal, close the conversation, hang up, then wait for them to get back to you.
Buy in November or December if you can; you can see how the house performs in winter, and as this is usually slow time in the property market, you may be able to wangle a ‘seasonal discount’. Don't look for a property without being pre-approved for your first mortgage. You will have much more negotiating power with the seller, and may be able to save thousands. You need to be sure you can afford the repayments. Lenders consider a number of things working out how much you can borrow, like the outgoings and your credit history, your income and employment status, the property value.
While lenders use different rules, most of them share these guidelines. A fixed rate mortgage seems a good idea on the face of it, but they often come with higher penalty costs. If there’s a good chance that you will repay the loan before the end of the agreed term, perhaps considering a variable interest rate which has lower redemption penalties is a much smarter choice. You may find a lot of companies offering very low initial rates, but hiding high additional costs within the small print. Ask them to explain all additional costs, variable rates and payment conditions. Don't just read the small print yourself. Regarding the property itself, don't take the vendor's word that repairs have been made. If the vendor agrees to make repairs, have your inspector verify the work's been done before closing. Ditto for any other claims made by the seller; verify them independently. If you have doubts about a particular lender or seller, or if you have a feeling that they’re being cagey with you, just walk away and continue looking for better deal elsewhere.
There’s no need to become enchanted by the house-buying process; it is in the end just another material good, and you can’t take it with you! And lastly: Try to keep the duration of the loan as short as you can. The shorter the 'term' the less you pay in interest. You may think the mortgage is affordable now, but what if you get into financial difficulties in ten years’ time? Find a mortgage that has low or no pre-payment penalties, and pay it off as quickly as you can. You'll sleep easier, and your bank balance will look a lot sweeter.
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