A beginner’s guide to getting a mortgage for your new home

If you’ve set your sights on getting your foot on the property ladder and are in the process of buying a new home, you’ll need to encounter the world of mortgages.

What are mortgages?

They’re essentially a long-term loan from a bank, building society or online mortgage lender that allows you to buy your new home. Given the size of the loan, mortgages are one of the biggest debts you can take out in your lifetime, with the average mortgage tending to be paid over 25 years or longer.

Just like there are numerous mortgage providers out there, there are also different types of mortgages to choose from. Most people tend to take out one of the following mortgages:

Fixed rate

Fixed rate mortgages involve you making payments that are based on an agreed interest rate and stay the same for a fixed timeframe; usually between two, three or five years. When those years are up, you automatically revert to a standard variable rate.

Variable

With a variable mortgage, your monthly payments may fluctuate based on the lender’s current rates, because the interest rates aren’t fixed.

Tracker

Tracker mortgages are a type of variable mortgage. Like variable mortgages, payments fluctuate from month to month and tend to be influenced by the base rate, which is set by the Monetary Policy Committee.

Other mortgage types include: Interest-only, 95% (mainly FTB mortgages), Green and Offset mortgages. For more on the wide range of mortgage options, read ‘Mortgage types explained‘.

5 key questions to consider getting a mortgage

Every buyer’s situation is unique, and there is no one-size-fits-all mortgage. Asking yourself a few key questions can make the mortgage application process that bit easier to navigate and help you find the right solution for you:

1. How much can you afford?

Buying a new Russell Home is an exciting step, and it’s important to feel confident about your finances too. Make sure your dream home fits comfortably within your budget and borrowing limits. If you’re unsure, helpful affordability calculators can guide you through the numbers, like this one from Money Helper. Alternatively, Independent Mortgage Advisors are good to use at this stage, as they have a wide range of knowledge, especially of the new build sector.

2. Do you know your credit rating?

Your credit score is your financial profile, showing lenders how responsibly you manage your money. A higher score can make it easier to secure the mortgage that is right for you. Staying on top of payments and avoiding missed bills helps keep your score high. If you do have a low credit score, it is still possible to secure your mortgage, although this may come with a higher interest rate, and you may need to come up with a larger deposit. You can check your credit score for free, here.

3. Have you done your mortgage homework?

There are plenty of mortgage options and lenders available, and the right one for you is out there. Navigating the mortgage market can feel tricky, but a specialist Mortgage Advisor or Independent Financial Advisor (IFA) can help you find the best fit for your finances. At Russell Homes, we can provide you with approved IFAs if you wish to use one for your purchase. For tips on finding trusted support, take a look at this guidance from Citizens Advice.

4. Have you got a Mortgage or Decision in Principle (MIP/DIP)?

If you know you can get a mortgage, then you should go ahead and get a MIP/DIP from a mortgage provider, as you are looking. Having one in place confirms how much you can afford to borrow. They also demonstrate to sellers that you are a serious buyer and are in a position to progress with the purchase.

5. Have you accounted for your reservation fee?

Buying and selling properties involve numerous fees, e.g. solicitors’ and estate agents’ costs; they’re all part and parcel of the overall process. If you’re buying a new build, you will need to pay a reservation fee, which is standard practice. Paying this fee also provides you with peace of mind that your dream home has been reserved for you and you only. There is also a 14-day cooling-off period when reserving your dream Russell Home, just in case your circumstances change.

How Russell Homes can help you

Legal and financial advice signposting

If you need help with finding a solicitor or financial advisor, we have a panel of solicitors and IFAs we can recommend to you.

Dedicated expert support

What’s more, our sales team have extensive experience in the new build industry, and are here to support you every step of the way, from your first viewing to the moment you collect the keys to your brand new home.