First Time Buyers
What can you afford?
Even before you start looking for your dream home work out how much you can spend and how much you will need to borrow to fund your purchase. Factor in all potential costs.Costs to consider:
- Mortgage arrangement fees.
- Survey fees.
- Land Registry fees.
- Solicitors and conveyancing fees.
- Your deposit.
- The cost of decorations and any new furniture.
- Moving cots for getting your belongings (especially furniture) from your existing home to your new one.
Types of mortgage
What you can afford to borrow, and your deposit, will to a certain extent dictate what type of mortgage you should go for. There is a long list. The main mortgages are:
- First-time buyer mortgages.
- Repayment mortgages.
- Interest-only mortgages.
- Fixed rate mortgages.
- Variable rate mortgages.
- Tracker mortgages.
- Discounted rate mortgages.
- Capped rate mortgages.
- Cashback mortgages.
- Offset mortgages.
- 95 per cent and 100 per cent mortgages.
- Flexible mortgages.
Buying – the cons
- It’s a big commitment – you need to be sure you can afford what you’re taking on.
- When interest rates rise, your repayments will go up. It’s important you’re prepared for a rise.
- It might not always be easy to sell your home, depending on what’s happening in the market.
- You need to be sure you can afford maintenance costs like fixing a broken boiler or leaky roof.
- If you stretch your budget when you buy you might not have money for meals out, holidays and entertainment.
- If the value of your home falls, you might be unable to sell if you owe more to your mortgage lender than your home is worth.
- You have less flexibility than when renting. For example, selling up and moving is more expensive as you have estate agency and legal fees to pay.
Help to Buy
The government's Help to Buy scheme – which provides assistance if you are buying a newly built house – can make a first-time purchase easier. There is an explanation of the scheme and advice here.
When you have made the decision to buy your first home you will need to find a deposit. Save as much as you can. The larger the deposit you have the better your choice of mortgages. A small deposit will restrict the mortgages available to you.
As well as helping with taking out a loan the government's Help to Buy scheme could help you save for the deposit.
If you save money into a Help to Buy ISA the government will boost your savings by 25 per cent. So, for every £100 you save you can get £25 from the government, up to a maximum of £3,000.
Help to Buy ISAs are available from a range of banks, building societies and credit unions.
The accounts are available to each first-time buyer, not each household. This means that if you are planning to buy with your partner, for example, you could receive £6,000 towards the deposit on your first home if you both get the maximum £3,000 government bonus.
You will need to get ‘mortgage ready’. There are a few things you can do to improve your chances of getting a mortgage. Lenders will check if you can afford the repayments. Checks will include a look at your income versus your expenditure, so you need to demonstrate that you are able to keep your finances in order. If you have any outstanding loans, pay these off before you apply for a mortgage. Avoid taking out any new loans. Speak to a mortgage advisor about your options.
Make sure you are on the Electoral Roll. It’s easy to do and will substantially boost your credit rating. Rationalise all your bill and make sure everything is registered to your current address to make it easy to trace.
Check your credit score on Experian, Equifax, Noddle or a similar site. If you know you have a bad credit rating, then stop applying for more credit. Searches carried out in a short space of time can count against you.
Use a credit card responsibly. Pay the balance off in full each month and demonstrate that you can handle credit.
Save for other costs
There are other costs to consider when you are buying your first home. These include legal fees, surveyors’ fees and removal costs. Put enough cash aside to cover these.
The legal process
There are several stages in the legal process of buying your first home. These are:
- Instruct a solicitor - The legal process can be complicated. You will need to instruct a solicitor to act for you when you reserve your new home. Your solicitor will check the contracts, title deeds and make searches and enquiries on your behalf. If you are buying a Larkfleet home we can introduce you to a recommended solicitor.
- Signing contracts - When you receive your mortgage offer contact your solicitor and arrange to sign contracts. Once you have signed, your solicitor will proceed to exchanging contracts.
- Exchanging contracts – There are two contracts, yours (the buyer) and one for the seller. When these are both signed and exchanged both parties are legally committed to proceed with the transaction.
- Completion – When the new homes is ready to move into the seller will contact your solicitor to complete the purchase and transfer the purchase price.
As a first-time buyer you may be able to avoid paying Stamp Duty. There is an explanation of stamp duty here [Link to Stamp Duty page] and a Stamp Duty calculator here [Link to calculator].
More advice for first-time buyers
There are many advice pages on this website covering everything from conveyancing to planning your new garden. Hopefully we have covered all you need to know as a first-time buyer. Please browse the website and take full advantage of all the advice.
If you are interested in buying a new Larkfleet home the sales advisor on your site will be happy to provide any further advice and information that you need.