The most important step when buying a flat is arranging a mortgage. Mortgages for first time buyers often need to go that little further. Not only do first-time buyers often need to borrow more money because house prices are so expensive, but first time buyers often have little or no deposit. This is an account of how we arranged our mortgage on our one bedroom flat in Hove, East Sussex, UK.
Even before we had seriously planned to buy a flat, I went to HSBC bank, with whom I have my current account, to enquire about the process of arranging a first mortgage and see how much I could borrow. I made an appointment with an HSBC financial advisor who walked me through the pro's and con's of their mortgage. In order to abide by the financial service authority mortgage lending rules, he could only advise on HSBC products and advised me that this was by no means the best offer available. HSBC offered me a graduate mortgage of up to 5 times my salary at a rate of 6.5% APR - a good amount of money but at a pretty poor interest rate. This was with a 5% deposit - which at the time was 5% more deposit than I had! Without the deposit (a 100% mortgage) the interest rate was 6.9%.
The next stop was an Independant Financial Advisor (IFA), who Rachel found on Shoreham High Street, to find out if this really was the best offer available to us.
The IFA in shoreham high street was a small mortgage broker who claimed to have access to every mortgage company in the UK. He asked as questions about our financial circumstances including how much we wanted to borrow, what deposit or savings we had, what we earned and what our outgoings were. We stated we were only interested in a capital repayment mortagage and not interest only. A few days later we recieved 4 mortgage offers in the post as follows:
All 4 were from the same provider - Halifax. We were not convinced that this was the best offer possible so went to a second broker - who offered us virtually the same - with the exception that he charged an arrangement fee of 1%! Therefore, £1400 if we bought a £140k flat! His offers too were from the Halifax so we decided to go directly to their Mortgage advisor on Church Road in Hove.
After all that tiring shopping around for mortgages - with the outcome being the same mortgage provider - we decided to go direct to see what mortgage the Halifax had to offer. Indeed, the Halifax offered us a very respectable range of mortgages - one of which we ended up taking. The best of which was a 2 year fixed rate mortgage at 4.3% APR, with a £400 arrangement fee - but no higher lending fee.
Whilst we were searching for our flat, one of the estate agents Wyatt and Son offered us an independant mortgage brokery service. Like they IFA in Shoreham, they checked all mortgages on offer from both high street and other mortgage lenders. The best offer they had was the same Halifax mortgage detailed above - which finally convinced us this was the right mortgage to take.