For many first-time homebuyers, the numbers associated with buying a property might seem daunting. But it’s important you’re aware of all financial details concerning your purchase. Knowing your house budget will inform how much your deposit should be, how much your monthly repayments will be, and what you’ll need to set aside to cover any other fees associated with buying a home.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
Even though it’s not always easy to buy a home, there are things you can do to prepare for one of the biggest financial decisions you’ll ever make. Here’s what you need to do to be mortgage ready so when you do find your dream home, you’ll be able to act quickly.
Saving for a deposit is usually the biggest obstacle
As most first-time buyers will tell you, the biggest obstacle to owning a home is usually saving up enough for the deposit. Nowadays, there are options for mortgages where you only need to put 5% down, but even for a home that costs £250,000 — the approximate average price of a UK home right now — that’s £12,500. However, the more you have saved, the more mortgage options are available to you. Larger deposits are more appealing to lenders, so the earlier you can start saving, the better.
A Lifetime ISA could help you own a home sooner
With a Lifetime ISA, you’re able to save up to £4,000 a year (as of the 2022/23 tax year) and the government will add 25% of your contribution, up to £1000 annually. In order to use a LISA to buy a home you need to be a first-time buyer, planning to live in the home you purchase, and the home must be no more than £450,000. Take advantage of this government scheme to help you save.
Get your finances in order
Your credit score is a major factor in the mortgage application process, so you’ll need to be aware of it. A good score will help you get a more competitive mortgage rate, so if your figure could use some improvement, take the steps necessary to increase your score. Lenders look for reliable borrowers and a good credit score is one of the most important elements to have in place when you begin your home search.
On top of that, mortgage providers review all of your financial information when they’re evaluating your application. As early as you can, ensure you’re tracking your income and expenditures in a budget and sticking to that each month. If there are any areas where you’re overspending, do what you can to cut back and ensure your finances are in top shape when it comes time to apply for a mortgage.
Be prepared for the extra costs
In addition to saving for a deposit, don’t forget about the extra fees you’ll incur such as legal fees, mortgage costs, moving expenses, and insurance. If you’re purchasing a home for £300,000 or less, you don’t need to worry about stamp duty, but between £300,000 and £500,000, expect to pay 5% of the purchase price in SDLT.
Ready to step your foot on the property ladder?
Whenever you’re ready to begin your home-buying journey, we’re here to help. We’ll help you through the entire mortgage application process and find the right mortgage option for you. Get in touch today.