Do you know the costs of getting a mortgage?
First-time buyers are becoming a more prominent fixture of the property market, with more people now able to get themselves a footing on the ladder for the first time. According to new reports, newcomers are accounting for as many as 22 per cent of new mortgages as of the end of April 2017. However, despite the fact more are coming to market, there are still issues around affordability.
According to a report published by conveyancing services provider My Home Move, many people do not actually know what they would have to pay to be able to get themselves onto the property ladder. So if you are a first-time buyer coming to market now, do you know what it would cost you to get a mortgage?
The study shows that the majority of people remain reasonably confident about what they would be able to afford in the current climate, and what they think they would be able to borrow to make their dreams of becoming a homeowner a reality. The majority of newcomers, it shows, would spend between £100,000 (21 per cent) and £150,000 (34 per cent) on a home, and believe they would be able to secure finance for a purchase of this size.
However, it also indicates that despite a rising confidence from potential new buyers, many people are actually unaware of what it would cost them in terms of their mortgage repayments. My Home Move's spokesman Doug Crawford said part of the problem is that the vast majority of potential new buyers live in rented accommodation before they buy, and many use their rental payments as an indicator of what a mortgage would cost them.
"According to industry figures the average rent outside of London and the South East hovers around £600 a month, suggesting that most aspiring first time buyers want a like for like swap in monthly outgoings, or even a saving," he added.
On average, people who are buying a home that would cost them around £100,000 say they want to be able to spend around £350 per month on their mortgage repayments. However, the study found that the average spend for a house costing this much would be around £450 per month. It's a similar story for those who want to spend a little more, with the average buyer estimated to be wrong by around 28 per cent on their monthly repayments.
The problem is even exacerbated when it comes to more expensive properties again. My Home Move said the average expected payment for a home costing £150,000 to £200,000 was still £550 per month. However, in reality, this type of property would cost buyers far more, with likely mortgage repayments sitting at between £676 and £900.
If you are planning on becoming a homeowner and getting yourself a mortgage, it can pay to speak to a financial advisor before you decide to apply for a mortgage. This will allow you to see what you would be expected to pay back, allowing you to judge whether or not you could afford your monthly repayments before you commit.