First Rung Of The Property Ladder

Buying your first home is both an exciting and daunting experience. You feel the thrill of finally getting on the property ladder, as perhaps a part of you actually feels like you’re finally an adult. But where do you start?

Firstly, you have to find out how much you can borrow, and get approval for a mortgage. There’s a whole range of mortgages out there, but in many cases a first-time buyer may require a 100% mortgage. However, this means you borrow the full price of the property without the need for a deposit, but you may have to pay a Higher Lending Charge which protects the lender against any loss should you default on payments and they need to sell the property. If property prices fall you may also have a mortgage that is higher than the actual value of your property on the open market, this is called Negative Equity.


An interest only mortgage requires you to just pay off the interest each month, rather than the capital you’ve borrowed. You are also recommended to pay a monthly sum into an ISA or some type of investment, the idea being that you will have sufficient funds at the end of the mortgage term to be able to repay the mortgage off in full. Some people with interest-only mortgages only pay off the interest, relying on their house being high enough in value to pay off the capital at the end of the term. This can be risky as there are no guarantees as to what house prices will be in 20 or 30 years time.

The most common mortgage in the UK is the repayment mortgage. These require you to pay off the interest plus a portion of the capital each month, with the guarantee that you will have paid off the whole sum at the end of the term. Repayment mortgages are useful if you can be confident of having a relatively steady income throughout the term, and taking out a fixed or capped mortgage can save you from rising interest rates.

Whatever type of mortgage you choose, be sure to pay the required amount per month or you could find yourself homeless. Mortgage lenders will repossess your home if you don’t keep up the payments.