Buying your first home is an exciting time, but it undoubtedly brings its challenges too. Navigating the mortgage process can be complex, and then there are so many other things to consider, such as conveyancing, surveys, insurance, and more.
While everyone’s circumstances are unique, here are a few general points to bear in mind to get your budget and finances prepared.
Before you apply for a mortgage, make sure that your finances are as healthy as they can be. Check your credit score, and make sure there is no inaccurate information on there. Any adverse incidents, such as missed credit card payments, may make it more difficult to secure a good mortgage deal.
The lender will also want to look at your last three month’s bank statements, to check that your income is steady, and your outgoings are not so large as to make the monthly mortgage repayments unaffordable. They will also ask for evidence of your deposit funds, so make sure that you have enough saved up.
It is possible to get 95% mortgages which require just a 5% deposit, but bear in mind that you are likely to pay higher interest rates on this type of deal. It may be worth waiting until you have saved up for at least 10% deposit in the long run.
Remember that it is not just the deposit that you will need savings for. Moving is an expensive business, with conveyancing fees costing between £800 and £1,500 on average. If you use a mortgage broker to source a deal, they may also require a fee, but this is usually a service worth paying for.
Some brokers do offer their services on a no-fee basis, but bear in mind that they may be working on a commission basis with a limited panel of lenders, rather than on a whole of market basis. This means that they may have an incentive to sell you a product which is not best suited to your requirements, and does not represent the best value for you.
Before you begin viewing properties, it’s a good idea to have a mortgage ‘offer in principle’ in place, as many estate agents will ask for this before accepting your offer. It will also give you a firm idea of the amount you can afford to borrow, and save you wasting time with viewing properties out of your price bracket.
Once you have had an offer accepted on a property, you will then have to arrange a valuation and survey, to make sure that you are paying a fair price for it, and to be alerted to any repairs or structural issues which may need addressing. If the property you are buying is worth over £425,000, you will also have to pay stamp duty.
There will be the costs of hiring a removal services to consider, and any new furniture or refurbishments which may be required. Finally, you will need house and contents insurance, and possibly insurance policies on your mortgage, such as Critical Illness Cover, Life insurance, or Income Protection Insurance.
