8 things you need to know before applying for a mortgage | Millennial Money

Hello and welcome to the latest video with
Money to the Masses. As you may have noticed there is different scenery today, that is
because we asked you to send in your mortgage questions because we are going to put them
to a mortgage broker. Here we are, here we have Will. I’ll let him introduce himself
to you. Hi there my name is Will, I am a mortgage expert at Habito, we are a free online mortgage
brokerage. I’ve got all of your questions so I’m going to fire them away at Will and
then hopefully we will get all of them answered for you. If I am looking to buy a house within
the next 6-12 months, what should I be doing now? The first thing I would suggest is, speak
to a mortgage broker. They will give you an idea of how much you can borrow and how much
it will cost you every month. The second thing I would look to do is review your credit history,
lenders, when you apply for a mortgage, will do a credit search on yourself and they will
look at your credit score to see if there are any missed payments. So you need to have
an idea what your credit score is, you can do this via Equifax or Experian who will be
able to provide you with a report. I would also suggest having a look at your passport
and making sure that it is currently in date. You will be surprised at how many passports
have expired and when you come to apply for a mortgage that can cause problems. I did
not know that actually, you learn something new every day. Great, make sure that your
address is updated on your bank statements as again that can cause issues later on down
the line. It is also really important that you understand other costs, it’s not just
the deposit that you need for a mortgage, there are other costs such as stamp duty,
valuation fees, solicitors fees, you will need to cover all of those on top of your
deposit as well. What I would also suggest is once you have an idea of how much you can
borrow, does that fit in with where you want to buy. Are you looking for a new build property,
are you looking for leasehold properties as well? They have different criteria and there
are different costs associated with leasehold properties as well. So as a whole, on average
how much would you suggest I have available for the costs of the fees? I’ll break them
down, so the first upfront cost when you apply for a mortgage is a valuation, some lenders
will offer a free valuation but if you have to pay a basic valuation is about £200-£400
depending on the property value. There are different types of valuations you can get
and your mortgage broker will talk you through which is the most appropriate for the property
you are looking to buy. You get a basic valuation or a slightly more in-depth valuation, the
more in-depth the higher the cost. Solicitors costs, usually they charge around £300 upfront.
I would say that £2,000 is more than sufficient to cover your legal costs. Mortgages, sometimes
they have arrangement fees, they can be added on to the mortgage balance so you don’t necessarily
need to pay that upfront but obviously you pay interest if you were to add it to the
mortgage. Typically they are about £1,000 or so. Another cost to consider is stamp duty.
If you are a first-time buyer and are looking to buy a property below £300,000 then you
are exempt from stamp duty which is a saving of about £5,000. Anything over and above
you would pay a bit of stamp duty. There are plenty of websites that have stamp duty calculators
so it’s really important that you review that aswell. Broker fees, some brokers will charge
up to £1,000 for their advice. I would always recommend a broker that doesn’t charge any
fees as that is one less fee to worry about. One key cost I would say is make sure you
have money for the house warming party! So as a first-time buyer which mortgage would
you recommend is best? I would say mortgages are based on your circumstances so I would
never say there is a set type of mortgage which is suited to first-time buyers. What
we tend to find is that a lot of first-time buyers go for a fixed-rate product, they might
have come from rented where they used to pay the same amount each month, therefore a fixed
rate would give you that stability of payments so you know exactly what you are paying on
a monthly basis. One thing I would think about is, are you looking to move in the next two/three/five
years, is there going to be any changes to your circumstances, for example, a change
of job or are you looking to get married, children on the way? These are all factors
you need to consider when thinking about what product is most suited to you. Again your
broker will talk you through what your plans are and what is the best product for you.
So what does a mortgage broker actually do? So your mortgage broker, ultimately they are
there to give you advice and they are there to arrange your mortgage for you. However,
don’t feel you need to have a property in mind if you just wanted to know how much you
can borrow they will talk you through that. They will provide you with the maximum you
can borrow, the monthly costs and they can also give you something called the mortgage
in principle. Which is something in writing which just confirms how much you can borrow?
Once you have found a property, and your offer has been accepted, they’ll search the market
for you to find the best deal. They will also show you how they’ve sourced that product,
they’ll tell you if there’s anything better for you and obviously, you can go directly
to the bank if the broker cannot access that product. They’ll submit the application to
the lender and they’ll deal with everything right up until you have your mortgage offer
sent out by the lender. How much does a mortgage broker cost? Are they expensive? They can
be, yes, some will charge up to £1,000 and beyond but several brokers don’t charge any
fees whatsoever, so I would certainly recommend going for one that doesn’t charge a fee. If
you go for a free mortgage broker, do you get a worse service than a paid-for broker?
Not at all, any good broker will highlight what is called true cost, so they will show
you which product is the best for you, taking into consideration the initial interest rate,
any fees associated, any cashback. So if there is a better product they should be able to
show you the better product, so you can therefore see for yourself what you are getting and
what you are missing out on potentially. Ok, so how does a free mortgage broker make money?
All mortgage brokers will earn money from a lender, its call a procuration fee. It’s
clearly highlighted on any illustration and it will show how much the lender is going
to pay the broker for recommending or referring a customer over to themselves. So they make
money from that proc fee that comes from the lender. Brokers that charge, they will get
that in addition to their proc fee and it’s a complete myth that you will get a better
service if you pay. So what is the best way to find the best mortgage deal? I would always
speak to a mortgage broker. Mortgage comparison sites are great however, they are not always
going to tell you whether you are eligible for that specific product. Also what lenders
will do, is they will highlight their lowest rates and that doesn’t always take into consideration
any fees that are associated with that product. So what your mortgage broker will do is they
will work out which is the best product for you based on what is called true cost. And
that takes the initial rate, the monthly cost, any associated fees and they will be able
to show you which one is the most cost-effective for yourself. So that is it for this week’s
video. Thanks so much for watching and I just want to say a massive thank you for sending
in your mortgage questions, it has been a massive insight into the world of mortgages
and I hope that it has helped you find out everything that you wanted to know. Also thanks
so much Will, really appreciate you letting us sit down and ask you all of the questions
that everyone from Money to the Masses has had. As ever, subscribe to our YouTube channel,
follow us on our social media our Facebook Money to the Masses, Instagram @moneytothemasses
and our Twitter @money2themasses. Thanks so much for watching, see you all next week.

Paul Whisler

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