Getting a Mortgage in 2023? Here’s What You Need to Know

2022 showcased the unsteadiness of our mortgage market, with the challenge of getting onto the property ladder becoming increasingly difficult. However, as we enter a new year and the market begins to settle, many will be looking to make their first property purchase in 2023.

With rates dropping below 6.5%,the majority of people looking to invest in a new home will need to take on a mortgage. There are many options available so it’s crucial to discuss what works best for you before making the final decision.

What Is a Mortgage?

A mortgage is an agreement between you and a mortgage lender that allows you to invest in a property of your own.

It is important to understand the difference between a mortgage and a loan. A loan refers to any financial transaction in which one party receives a lump sum of money. A mortgage is used to specifically finance a property. ,

However, if the payments to the mortgage lender stop, the lender has the right to take possession of the property. This is also known as foreclosure.

What Types of Mortgages Are Available?

First-time buyer mortgages are designed for people that are new to the housing market. To be considered a first-time buyer, you must be purchasing your first property which you plan to use as your main residence.

You cannot be categorised as a first-time buyer if you have previously owned a property, even if it was part of a shared ownership scheme or in a different country.

Capital and repayment mortgage

A capital and repayment mortgage is the most common type of mortgage being offered at the moment. With this mortgage you will make monthly repayments for an agreed period of time until you’ve paid back both the capital and the interest.

You must also then decide the type of interest rate you want on your repayment mortgage. You can choose to have the interest rate fixed over time, or variable – which means the interest rate can go up or down.

Interest-only mortgage

With this type of mortgage you only pay the interest due on the amount you borrowed each month, and repay the capital at the end of the mortgage term which is usually 25 years.

Right to Buy Mortgage

Introduced in the 1980s, the Right to Buy scheme allows tenants to purchase a council property at a discounted rate.

To qualify for the scheme, the applicant must have been a council or housing association tenant for at least three years. The Right to Buy discount varies depending on where the property is located within the UK and whether the property is a house or flat.

Guarantor Mortgage

A guarantor mortgage is for people who would like to purchase a property, however, do not have enough income to qualify for a mortgage on their own.

The guarantor provides a guarantee to the lender that they will repay the amount borrowed if the borrower does not repay their agreed amount.

Get a Mortgage Agreement in Principle

A mortgage principle can be a great way to plan ahead when applying for a mortgage.

The mortgage principle is a written estimate from a bank or building society that provides an idea of how much money an individual can borrow. The estimate can be shown to estate agents and vendors to help prove you are a reliable applicant. Once a property has been found and an offer on a property accepted a full application would need to be submitted before the mortgage offer is approved.

Not only can a mortgage agreement in principle help to clarify a budget for house hunting, but it can also be a key step to buying your property.

Let Eatons help you with your new property

With additional costs such as conveyancing fees and surveys, applying for a mortgage can seem like a daunting task. However, as the country recovers from the pandemic and the housing market begins to return to normal, 2023 could be the perfect year to conveyancing fees and surveys.

Here at Eatons, our team of expert lawyers can make the process of buying a property as easy and stress-free as possible. Contact us today