Mortgages for first time buyers
Things to be aware of:
A property doesn’t become yours until you’ve paid the whole mortgage off. It may sound obvious, but it’s important to bear this in mind when choosing a mortgage. If you can’t keep up with your repayments, your home could be repossessed.
That’s why it’s crucial that you sign up for the right deal. Here’s what to look out for:
Be careful about committing to a mortgage plan that’s hard to get out of – avoid deals that come with severe exit penalties.
If you sign-up for a long-term deal, make sure that it has a low interest rate.
Bear in mind that, as a first-time buyer, you’re in a stronger position than ever before. There are plenty of mortgage lenders competing for your business. So, it’s well worth shopping around for the best deals.
Having enough money
Whilst it is possible to secure a 100% mortgage on a house, mortgage lenders are often reluctant to lend the full value of the house. Therefore, it’s likely that you’ll need to pay the remaining 5%-25% – the deposit, before you can move in.
In addition to the deposit, there are other costs that you’ll need to budget for:
Property valuation & survey fees
You’ll need to carry out a valuation of the property you wish to buy – this can cost around £130, although the amount is variable. Your mortgage lender requires this information in order to assess how much to lend you. Additionally, a full survey of the property is recommended, in order to ensure there aren’t any structural problems such as dry rot, subsidence or vermin. Again, this cost will vary, but should be between £200-£300.
Legal expenses
In order to transfer the property deeds into your name, you’ll need to hire a solicitor or licensed conveyancer. You should also request a detailed search of the property’s local area to ensure that there aren’t any plans to build a motorway through the area or any building restrictions.
If your property is worth over £250 000, you’ll also need to pay a tax called Stamp Duty. This ensures that your rights as the legal owner are upheld. Finally, Land Registry Fees are also required to confirm you as the legal owner of the property. More info.
Bear in mind that most mortgage lenders are unlikely to lend you more than 3 times your salary. So, if you’re buying alone, it may prove difficult to find enough money to buy your dream house. However, some mortgage lenders will agree to a loan that’s 4 times your salary, IF you present your case well.
Buying your first home
So, you’ve decided to buy your dream home. You’ve contacted solicitors, surveyors, and your mortgage lender. You’ve paid for valuations, conveyancing, and saved for a deposit.
But even after all that, there’s no guarantee that you’ll complete the deal. The seller doesn’t have to commit until the last moment, so, if another buyer makes a more lucrative offer, there’s a chance you may lose the house.
That’s why it’s crucial that you close the deal as soon as possible.
Buying a home as a couple
Buying a home with your partner enables you to secure a bigger mortgage and therefore to buy a better property. However, do bear in mind that if one of you stops making mortgage repayments, for whatever reason, you could be responsible for paying your share AND your partner’s.
One solution to this could be an interest-only mortgage, with the capital being repaid from an ISA. This option offers an inbuilt safeguard because they can only be held in individual names. So, you’re unlikely to be landed with a huge bill, if it all goes wrong between you and your partner.
