What first time buyers need to know

Fb - First time buyersBuying your first home can be an experience you’ll never forget. While the actual process of house-buying only starts once you have found a property that you might wish to call home, planning ahead can give you a huge advantage when it comes to getting the home you really want. In particular it is hard to overstate the importance of organizing the family finance so that you have savings in place to put down a respectable deposit and still be able to afford moving costs.

Bigger is better

In very simple terms, a borrower’s deposit is a lender’s protection. When deciding whether or not to accept a mortgage application, lenders have to think about the challenges potential borrowers may encounter during the life of the mortgage. These may include temporary falls in house prices, periods of unemployment, and periods of reduced income or at least reduced disposable income (for example after starting a family). The bigger the deposit a potential borrower can put down, the less exposed the lender is to changes.

Bigger deposits make for smaller monthly repayments

As of April 2014, lenders are legally obliged to assess mortgage applications in terms of “affordability”. In other words, they need to make sure that potential borrowers can afford to meet the repayments over the lifetime of the mortgage. People who need to borrow less also need to repay less. This means their monthly repayments will be smaller and therefore more likely to be seen as affordable.

Set some money aside for moving costs

It’s important to budget for all the costs involved in moving home. Buyers may be liable for stamp duty and are will need to pay solicitor’s and surveyor’s fees. The actual cost of moving from A to B and of furnishing and equipping a new home will depend on a variety of factors. It can, however, be useful to have a budget for unforeseen expenses. In other words, funds available to deal with anything about your new home that you only notice once you’ve moved in. Although not strictly a home-purchasing cost, new home owners household items as the need arises.

Check if there is government help available to you

The Help to Buy scheme is available to help people buying new-built homes. Provided that buyers can put down a deposit of at least 5%, the government will lend up to 20% of the purchase price of the property. This means that the buyer only needs to get a mortgage for the remaining 75% of the purchase price. The Mortgage Guarantee Scheme can be used to buy either new-build or pre-owned property. In this scheme, lenders essentially insure a part of a mortgage with the government. This means that they are guaranteed to get that part of their money back even if the borrower becomes unable to make the repayments. Of course, there are rules and limits for both schemes which means that they may not be applicable to, or suitable for, everyone.

Consider speaking to your family

Older people who have had more time to accumulate personal wealth, may be willing to act as mortgage guarantors for younger people that they trust. This can be helpful for people who might struggle to meet affordability criteria as applied objectively by lenders. It could also be helpful for people who’ve had a chequered financial history and whose credit ratings are therefore less than pristine.

Get some professional financial advice

Investing some time talking to a qualified financial adviser can go a long way to helping you make the best choices during the house-buying process and beyond. Whatever your plans and goals for your new life in your new home, getting your finances in the best possible shape is always a good starting point for making them a reality.


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