Help for First Time Buyers

Mortgage Do's and Don'ts. April 2008

When heading into the property market for the first time, it's quite easy to be bewildered. First and foremost, there's quite a lot of jargon for you to learn about, and then you should undertake plenty of information on property prices, long term investment and mortgage types. If you don't, it could cost you thousands of pounds, particularly if you agree to a bad deal over the long term. However, there's plenty of information online, particularly from the Financial Standards Authority's Money Made Clear website in the UK. Here's a quick list of do's and don'ts when you're heading into the property market for the first time.

Do's

1. Before you get started on your house hunt, you must be completely aware of what you can afford. Work out your price range and your potential mortgage repayments and stick to it as an absolute ceiling.

2. Consider how your spending patterns will change once you own a home. If you're moving in with a partner, then it's likely that your habits will change to some degree. For instance – will you go to the pub as much? Will you do your shopping alone or with your partner? Working out individual needs is one thing, but they usually change if you have someone living with you.

3. Tell the truth in your application. It's effectively fraud to lie, and if you get things wrong then you could end up paying over the odds for your mortgage.

4. Shop around. Think of your budget and then do plenty of research on the best mortgage deal for you. It might not seem too attractive, but getting the wrong deal could cost you thousands of pounds a year. It's worth having at a couple of financial comparison websites such as uSwitch. Also, take a look at Alliance and Leicester for some of the UK's best mortgage rates. They also offer a useful mortgage calculator on their website.

Don'ts

1. Don't take on more than you can afford under any circumstances. If you think that you will only just be able to make your mortgage repayments, then it is likely that you are taking too much on.

2. Inflate your income in your application. Not only is this fraud, you'll also probably end up with a mortgage that you can't afford.

3. Try and predict interest rates in the future or hope they will drop or lower. Interest rates do change, but would you be able to cope if they went up? It could well happen.

4. Don't take the first product you are offered. You'll more than likely be attracted to mortgages that your bank offer, and often they will reward you with a discounted rate. However, make sure you check around many more products - pay heed to number 4 on the ‘Do's' section!

If you're looking for a sound investment or just a great way to save, then take a look at Alliance and Leicester's ISA. Time is running out for you to get this year's allowance!