6 tips to help you buy a house in UK : How much can I borrow

The property market is experiencing a major boom right now. As a result, those looking to buy a house now have to deal with a crowded market, high prices and a smaller pool of properties available. 


  1. Do your research

Before you even start looking for a property to reside in, figure out exactly what you want and need. Is there a particular area you would like to live in ? Take a look online at properties in that area to get an idea of prices and what you can expect in terms of size and style/decor of the place.  


To make things easier once you find the right property for you, have a mortgage-in-principle ready to go so you don’t lose the property to another buyer.


  1. Don’t be afraid to ask for help


It is advised to use an estate agent if you feel overwhelmed by the options that are available. This is a great option if you’re not sure what type of property is right for your specific needs. 

Agents are also useful if you need help understanding the current mortgage situation and process throughout. An agent can offer a professionally organised process so you can focus on picking the right house to buy without stressing about the small stuff.  


  1. Look for houses under your budget

“At an average of £275,000, house prices are currently at an all-time high,” quoted by  Ross Counsell, chartered surveyor and Director of GoodMove. “Because of this, buyers are finding themselves paying way above the asking price for their properties”. To protect your finances, Counsell recommends looking for properties that fall under your budget. 

Be ready to jump in


In a heated market, you won’t have much time to ‘think about it’. If you find a house to buy that you really love, you may need to buy it right away or you risk the chance of losing it.


You should also consider how soon you want to move out of your current residence and how this will affect your buying decision. Make sure everything’s in order so you can move ahead with your buying plans.  

  1. Be flexible


“Being flexible and an easy person to work with is paramount in buying a home in a crowded market,” quoted by Counsell. And compromise will have to happen when trying to buy a house.


It might be worth creating a list of non-negotiables and a list of things you can compromise with. Maybe you cannot afford everything that you would like in a house, but if a garden and a third bedroom are non-negotiable, maybe you can give up something else to stay within your means and budget. 

  1. Don’t give up


Trying to buy a house in a seller’s market can be disheartening and tough at times. To remain positive, it’s important that you’re in tune with the market, and be prepared for any ups or downs during the process. 


Above all, relax. Don’t get too caught up in the heat of the moment.  Ignoring property issues or overpaying just because you’re desperate to buy a house  will hurt you in the long run. 


What is a lifetime mortgage?


A lifetime mortgage is a form of equity  that allows homeowners to borrow money against the value of their home…they can also retain full ownership of their property. You can receive the money as a lump sum or either paid in monthly instalments. 


Interest is charged on the amount that you’re planning to borrow. This can be repaid or added later to the total sum of your loan. 


When you die or enter long-term care, the house is sold and the proceeds used to repay the loan plus any accrued interest at that given time. 


Most lifetime mortgages come with a no negative equity guarantee. This essentially guarantees that once your home is sold, you or your beneficiaries will not have to pay back any more money than the value of the home, even if this value is below the amount of the loan that was given out. 

So, what are the different types of lifetime mortgages ?


There are actually two different types of lifetime mortgages.

  1. Interest roll-up mortgage


With this mortgage, you get a lump sum or regular amounts which then get charges interest, which is added to the total of your loan. You won’t have to pay back any amount until the end of the loan duration, for example, when you die or move into a place of long-term care.


The disadvantage of this plan is that interest will continue to rise as it rolls up and accumulates very quickly…


  1. Interest-paying mortgage


With this type of lifetime mortgage, you get a lump sum and then you pay back the interest or part of the loan on a monthly basis. This reduces the impact of interest compounding.


The remaining amount will be paid off when the property is sold at the end of the property’s loan term.


Some providers might also allow you to pay off capital as you wish, however,  you might have to pay an early repayment charge.


Whichever way you choose to deal with interest, withdrawing your money in smaller increments over time as regular income rather than as one large lump sum can help keep your total interest from growing massively. That’s because you will only be charged interest on the amount you take out. 


Who can access a lifetime mortgage?

To be eligible for a lifetime mortgage, you must be:


Over the age of 55, applying for a mortgage against your main residence.


How much can I borrow?


Normally, you can borrow between 25% and 60% of the value of your home. There is also a minimum loan amount, which can range between £10,000 to £45,000.


Money Advice Service has claimed that the amount you can borrow will depend on your age as well as the value of your property. Typically, the percentage increases according to your age at the time that you took the lifetime mortgage. 


Is a lifetime mortgage a good option for me ?


Whether a lifetime mortgage is right for you will depend on your personal circumstances. Here are a few key things below to keep in mind.


Money taken from your residence reduces the overall value of your estate and the amount left to your beneficiaries.  


Taking out a lifetime mortgage can impact your tax position/bracket as well as your entitlement to state benefits like pension credit and universal credit.


Lenders will expect you to keep your finances in good shape throughout. This will involve budgeting for things like building insurance, legal fees and valuation fees. The costs for these extras can cost between £1,500 and £3,000.


If you are thinking of taking out a lifetime mortgage, it’s useful to first seek advice from a qualified independent financial adviser to ensure the right precautions are solidified. 

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