So now you have a rough idea of how much it will cost, but how can you get a mortgage on good terms for the property you want?

prepare to be credit-rated...

The myth goes that you can borrow up to five times your salary these days. If this were true, the UK would have a lot more home repossessions on their hands. Banks consider several factors when deciding how much they want to lend you, which is referred to as credit rating. These include your salary, deposit, and credit file (including current loan commitments)...

your basic salary

Banks still prefer to lend up to 3 times your salary, but some will offer multiples of up to 5 times your salary. Others will use ‘affordability calculators’. Beware: ensure your monthly repayments are manageable now and in the future!

your deposit

If you have a decent deposit you are likely to be offered a higher amount or a better rate. However, there are 100% mortgages that do not require a deposit, and occasionally up to 125% (to include repairs and charges). These may be a good option if you don’t have (and can’t save for) a deposit, but you are likely to be offered a relatively high interest rate. There is also the big concern that the bubble is going to burst and you will wind up with negative equity (where you owe your mortgage provider more than the value of your home).

your credit history

If you’ve been an angel and paid off your credit card balances each month then the banks will consider you low risk and offer you a good rate. If you’ve let the devil manage your finances in the past, you might find it useful to get a copy of your credit report from a credit referencing agency (see our useful sites page) and be honest to your mortgage arranger from the start! Any current loan commitments that you may have, such as graduate or professional studies loans, car finance agreements or credit cards, will be taken into account as part of 'affordability testing'. Most mortgage calculators (see our useful sites page) ask you to input your current credit commitments in order to provide you with a more realistic result of how much you might be offered by lenders.

mortgage malarkey

It's inevitable that most first time buyers will need to take out a mortgage on their first home, unless your employer is particularly generous with bonuses (unlikely!). Your next step after calculating how much it's all going to cost and what you can afford is to think about what type of mortgage would suit you best and how to ensure you get approved for that mortgage.

will i be in a fix if i don't fix?

If you’re fortunate to have a good pot of savings for at least a 5% deposit and you earn a decent salary in full time employment, then you’re in a good position! Your first big decision will be the type of mortgage that will suit you best: Fixed rate, Variable rate, Trackers, Offset mortgages … the world’s your oyster! Do your research but ask the basic question to yourself – Will I be in a fix if I don’t fix? If interest rates continue to rise, monthly repayments could rise by around £25 a month on a variable or tracker mortgage of £150,000. If you’re not a risk taker and another rate rise would cause you to go hungry for a month, then it’s probably best to fix so you know the exact level of your repayments for the next 2 or 3 years. In a recent survey of mortgage advisors there was complete disagreement as to the future of interest rates over the next few years, so the subject is more than a little hazy!

You will also need to decide whether it’s best to go for a capital and interest repayment mortgage or an interest only mortgage (which would have lower monthly repayments). With capital and interest repayments the property belongs to you at the end of the life of the mortgage (usually 25 years). With an interest only mortgage it is your responsibility to put money aside to pay for your home at the end of the mortgage term otherwise the lender may repossess. However, most people usually move on in 25 years!

mortgages for people with little or no deposit

As young people are incurring more and more debt to study and travel, it's much harder to save for a deposit. Also, with the property market moving so fast, prices can increase faster than you can save the deposit! One increasingly popular option is to opt for a 100% (or higher) mortgage, where the lender will finance the whole purchase price. This may be a good solution to getting you on the property ladder, but be prepared that you might not be offered such a good rate or as much money (i.e. you may have to search for a cheaper property). The other risk is that if property prices fall, then the value of your property may be lower than the amount of your mortgage and you would have to find a way to repay the difference if you wanted to sell your home or if the mortgage came to the end of its life (negative equity).

"i'll leave home if you promise to be my guarantor!"

Most parents want to help their children by donating a generous deposit for their first home if they are in a position to do so. However, if your parents aren’t in such a fortunate position or just not in a generous mood when you ask them for help, they could act as guarantors (hopefully you won't need to blackmail them as above). It provides the bank with security that repayments will not fall into arrears, so they can offer you a better mortgage.

Obviously, your parents would have to disclose their financial circumstances to the mortgage provider and in the event that you could not make the monthly repayments, your parents as guarantors would then be liable. It is therefore wise to have a very grown-up discussion with your parents prior to signing the mortgage application, in order to reassure them that your extreme partying and shopping habits are a thing of the past and that you are a responsible and mature young adult!

the mates' mortgage

If you envied how easily Rachel and Monica, and Chandler and Joey lived together, you probably think that buying with friends must be great! Well it’s becoming more popular and allows you to pool together your resources and get a better place. But remember that you will need to meet with a solicitor and draw up a watertight agreement that takes into account any eventuality e.g. what happens if one of you falls on hard times, one of you wants to move out or if you all fall out spectacularly (hopefully not!).

part-buy/part rent schemes

These schemes are increasing in number and popularity and in the majority of cases have government backing. Each scheme is likely to have inclusion criteria and they are in short supply, so you will need to be aware of the schemes in your local area.

The most developed part buy scheme applies to Key Workers, mainly teachers, healthcare workers and the emergency services. Some schemes do accept non Key-workers but the above groups may take priority.

The premise is that if you buy a 50% share of a flat, then you would pay a mortgage on 50% of the flat and pay rent to the scheme for the rest of the flat. When you sell the flat, you get 50% of the sale price (and of course 50% of any profit made). It enables people to buy a property they may otherwise have not been able to afford and usually they are modern and of good quality.

love a lodger

This helps to cover the mortgage repayments significantly. Some mortgage lenders might even take this into account when deciding how much to offer you. Be aware though that you may not have a lodger all the time and you need to be able to pay the mortgage even when the room is unoccupied. You also need to be wary about who you accept as a lodger – always get references and take a deposit in case they move out whilst still owing you rent. Check out our useful sites page to search for housemates.

exercise your right to buy

if you’ve rented from the council or a housing association then you may be eligible to buy your home in the Homebuy scheme. They may also agree to take part in a part buy/part rent scheme.