Buying a new house is filled with difficult decisions that will affect you for years to come, and choosing the right mortgage for you is one of them. While there are many things to consider when choosing a mortgage, usually the price is one of the most important factors that will influence your decision. Banks offer different interest rates and terms depending on your credit history and the deposit you are putting forward, so it’s worth thinking about this even before you start looking for a suitable property.
The first thing you need to do when you go mortgage hunting is to take a good look at your credit history. If you don’t know anything about your credit rating or credit history you should get a report from one of the national credit rating agencies, as that’s exactly what your bank representative will do when negotiating your mortgage. Things that could affect your credit rating negatively are missing payments, however small, on your credit cards or any other debt, so always make at the very least your minimum repayment on each of your accounts. If you ever had a bankruptcy you may find it very difficult to find a lender willing to offer you a cheap mortgage.
Credit ratings are what banks use to decide whether you are to be trusted with paying off your debts on time, so if you have never had a credit card or any sort of credit you may find it negatively affects your mortgage negotiations. So if you are planning to buy a house in the near future, you should get a credit card and pay the balance in full every month for a few months before you start house-hunting. Your employment situation is also something your bank will look at, so it’s a bad idea to abandon your permanent, well paid job in order to start a freelance career right before starting house-hunting.
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Along with your credit rating, banks will look at the amount of money you want to borrow compared with the value of the house you are buying. This means that with a high enough deposit your chances of getting a cheap mortgage with a low interest rate increase greatly. However, increasing your deposit is often easier said than done, as people often try to buy a house that is as good as they can afford. If your credit rating is bad you will be asked for a higher deposit as well, so keep that in mind when looking for a mortgage. Always shop around and compare mortgages from different providers, as the rates may vary quite a lot.
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