Buying a home is one of the biggest and most expensive investment most Britons will make in their lifetime, making it all the more important that they have a good grasp on the intricate finances involved. Property finance specialist and director of Anderson Harris, Adrian Anderson, shared his six top tips for first time home buyers.
Nationwide Building Society reported at the end of March that the annual house price growth in the UK was 14.3 percent.
This calculates as an increase of more than £33,000, with the average house price at a record high of £265,312.
With this in mind it’s no surprise that younger generations are growing more dismissive and concerned about their prospects of owning a home in their lifetime.
However, it can still be done, but Mr Anderson suggested “they want to make sure they tick all the boxes” in order to secure a good mortgage and strengthen their position to buy their dream home.
The first of these boxes is understanding mortgage capacity.
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The world of work and income has changed dramatically, with a range of employment models and payments in play, with mortgage lenders usually having different criterion for each type.
Mr Anderson advised Britons speak to “an independent mortgage broker before you start your search” as this could help them understand their mortgage capacity and general budget when browsing the market.
He noted that this step has become all the more important “with rising costs and interest rates” and that lenders are updating their affordability calculators to better reflect the current cost of living.
He said: “Having a current and clear view of your mortgage capacity will therefore be important when you start viewing properties.”
Having a good credit score can greatly assist one’s potential for finding the best possible mortgage, but a variety of factors affect this score, including:
- Having lived at multiple addresses in a short period of time
- Having no credit history
- Not being on the electoral register
- Not having utility bills in their name.
Britons who don’t use debt products such as credit cards may find they have a limited or no credit history, which is used by lenders as a reference to see how consistent they are with paying back debts they owe.
Mr Anderson recommended Experian or Equifax services where Britons can check their credit scores without impacting their score.
Having a high credit score can be incredibly useful as most first-time buyers have a small deposit, but a high credit score can help them secure a high loan to value mortgage as a result.
Mr Anderson also cautioned Britons to remember that lenders look at their income but also their outgoings. People who have many outgoings and credit commitments may find they have a limited mortgage capacity.
This is not to say that Britons with credit cards or loans cannot secure their ideal mortgage, but being up to date with payments on all commitments will put them in good stead.
For those buying a home with friends or siblings, Mr Anderson advised they put an agreement in place with a solicitor first.
This agreement will log who contributes what and what percentage will be allocated to each party involved if the property is sold.
Mr Anderson said: “It’s very important to do this at the outset to protect yourself later. It should not cost much time or money to put in place and is certainly an investment well spent.”
Alongside this, Mr Anderson recommended Britons consider how long they will likely use the property for, as this could alter what type of mortgage would be best for them.
He shared: “Long-term fixed rates are currently very attractive and can help with budgeting. They also provide peace of mind against interest rates increasing.
“The downside of them though is that they will include early repayment penalties. These will kick in if you choose to move on quickly by repaying the mortgage during the fixed rate period. When looking at a property, think carefully about the area it’s in, your circumstances, and your plans.
He highlighted: “Do not commit to a long-term fixed rate if you think you’ll outgrow the property in several years.”
Even though buying a home can be an incredibly expensive endeavour even with just the bare bone costs, Mr Anderson noted “it doesn’t pay to cut corners”.
He advised: “A sensible investment is to instruct a good solicitor. Also don’t just rely on the bank mortgage valuation (survey) of the property. This doesn’t always give you the full picture of the property’s condition and your potential liabilities going forward.
“Do commission your own survey so you are fully aware of what you’re buying. To find good professional contacts, reach out to friends or other people you know who may have purchased recently and ask for recommendations.”
Finally, there are a range of Government schemes designed to help first-time buyers make it onto the property ladder.
These include savings products like the Lifetime ISA, financial support through shared ownership and a loan to help lighten the costs of a new-build home.