1. Deposit
The first step is to understand how much deposit you are able to put down. The majority of lenders require a minimum 5% deposit however the actual amount you put down is your own choice. The bigger the deposit, the lower the loan to value ratio will be, meaning you can obtain a lower interest rate with a larger deposit.
There are savings schemes available to help with your deposit. The Lifetime ISA (LISA) allows you to save up to £4,000 each year with the addition 25% bonus on top that the state provides. You can use this money towards your first home if the property costs £450,000 or less. If you’re buying with someone who is also a first-time buyer, you can both use your LISA savings and bonus.
Help to Buy (HTB) ISA’s are no longer available to open but you may already have one open that can be used towards the deposit. In addition, most lenders are happy to accept deposits gifted from family members if you are lucky enough to have someone happy and able to help.
2. Work out how much you borrow
It is important to understand how much you can borrow. The amount will vary from lender to lender depending on what scheme you are hoping to use. A standard, non-scheme mortgage will offer a different amount compared to a Help to Buy mortgage or a shared ownership mortgage. In addition to this, different forms of income such as overtime, commission and bonus can increase your loan amount. This amount will also vary from each lender. Your mortgage broker will use their expert knowledge to recommend the best option available to you, taking into consideration how much you can realistically borrow.
It is important to think carefully about whether you can afford a mortgage and to consider what would happen if interest rates went up. The mortgage needs to be within your financial comfort zone – don’t push too hard to risk future unaffordability.
Shared ownership and Help to Buy
Shared ownership
This is where you buy a share of a home from the landlord, who is usually the council or a housing association, to pay rent on the remaining share. You will need a mortgage to pay for your share, which can be between a quarter and three-quarters of the home’s full value. You then pay reduced rent on the share you do not own. In the future, you can choose to buy a bigger share in the property and ‘staircase’ up to 100% of its value.
Help to Buy
This is a government scheme to help first-time buyers purchase their first property using a 5% deposit. The scheme allows you to borrow 20% of the purchase price, interest-free for five years. In London, this is increased to 40%. You can apply to use the scheme until 31 March 2023.
3. Agreement in Principle
The next step is to get an agreement in principle in place. An AIP confirms the amount the lender will consider lending to you. This also involves a “soft search” credit search against each applicant, meaning it does not impact your credit score. Once you have your agreement in principle in place, it confirms to the seller and their agent that you are a serious buyer.
4. Check the housing market
You will need to look at the houses on the market and get an idea of what you are looking for. How many bedrooms do you need? Do you want a garden? What about a garage or off-road parking?
A good start is to search for properties on websites like Zoopla. Once you know the types/sizes of properties that interest you, register with an estate agent so that you receive alerts when similar properties come on the market. Bear in mind some estate agents are more persistent than others so it’s worth limiting the number of agents you register with so you don’t become inundated with calls and emails from agents.
Arrange viewings: When you see a new property that you like, call the estate agent and arrange to view the property as there is no harm in looking. The more you view, the better idea you will get of what you might be able to afford.
5. Submit your offer
Once you have found a property you like, let the seller know by submitting your offer. Always be prepared to negotiate, you can always increase your offer, but it is very difficult to reduce your offer! The asking price is purely the sellers’ opinion of what the property is worth. If you think differently, offer accordingly but be prepared to back it up with date/rationale to the agent when submitting your offer.
Once your offer is accepted the agent will ask for your solicitors’ details so be prepared with these.
Additional Costs
The other costs to be aware of are:
- Solicitor or conveyancers fees (this often includes extra costs, such as search and Land Registry fees)
- Solicitor or conveyancer fees (this often includes extra costs, such as search and Land Registry fees)
- Survey costs
- Mortgage arrangement and valuation fees
- Removal and moving in costs
- Buildings insurance
- Initial furnishing and decorating costs
- Stamp Duty (Land and Buildings Transaction Tax in Scotland, or Land Transaction Tax in Wales).
Additional Costs
The other costs to be aware of are:
- Solicitor or conveyancers fees (this often includes extra costs, such as search and Land Registry fees)
- Solicitor or conveyancer fees (this often includes extra costs, such as search and Land Registry fees)
- Survey costs
- Mortgage arrangement and valuation fees
- Removal and moving in costs
- Buildings insurance
- Initial furnishing and decorating costs
- Stamp Duty (Land and Buildings Transaction Tax in Scotland, or Land Transaction Tax in Wales).
6. Speak to a Mortgage Broker
Securing a mortgage is one of the biggest financial commitments that you will likely ever make. While it may feel scary, it need not be difficult as there is a lot of help available. It is wise to use a whole of market mortgage broker as they will have access to information that you will not — such as lenders’ credit and affordability criteria. They will recommend the right deal for you according to your personal situation and will be on hand throughout the process to answer any questions you have.
At Bennison Brown, customer service is at the heart of everything we do. We go above and beyond for our clients to ensure they are supported throughout the process. We take the stress out of the situation to make sure your first purchase is as smooth as possible.
If you would like further information, contact us today to arrange an appointment. We will be delighted to have an initial, no obligation chat to help you as much as we can.