Before applying for your first mortgage you will typically need to have done the following:
- Checked your credit file and credit rating with one of the main credit reference agencies.
- Saved up a cash deposit
- Established how much you can borrow
- Ideally have an agreement in principle in place before choosing a property
When you apply for a mortgage the lender will assess your affordability by looking at your annual salary and any other income you receive, as well as your outgoings, including credit card and loan debts, household bills, childcare, and general living costs.
The lender will also check your credit history to see whether you’re a reliable borrower and will then use this and its affordability assessment to decide how much you can borrow.
The size of your cash deposit towards the home purchase will also have an impact. The greater the cash savings you can put down towards your first home purchase the less you will need to borrow through a mortgage. Mortgage providers usually have a maximum loan-to-value (LTV), or percentage of the property value, they’re prepared to offer. If, for example, you want to buy a £200,000 property on an 85% LTV mortgage, you’ll need a 15% deposit, which comes to £30,000.
When you’re ready to start viewing properties it’s a good idea to get a mortgage agreement in principle from one or more lenders. This will give you a good idea of how much you can borrow. Estate agents may also want to see this to ensure you’re serious about buying.
Stamp Duty land tax (SDLT) is a tax you’ll have to pay when purchasing a property or land above a certain value. Stamp duty is levied in England and Northern Ireland and there is the equivalent Land and Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales.
When you buy a property you might also need to pay various fees and charges upfront such as:
Mortgage Arrangement Fees
Schemes available to help first-time buyers?
Help to Buy: Equity Loan
Available to first-time buyers in England, the scheme offers loans of up to 20% – or 40% if you’re in London – of the value of a new-build home costing up to £600,000. The scheme is open to first-time buyers and those looking to move up the ladder.
If you’re aged 18 to 39 and are saving up for a deposit to buy your first home, you can save into a Lifetime ISA where cash is topped up with a 25% bonus by the government. You can pay up to a maximum of £4,000 a year into the account, which can be a cash ISA or a stocks and shares ISA, and claim an annual government bonus of up to £1,000. You can use this money to buy a property costing up to £450,000.
If you’re a first-time buyer earning less than £80,000 a year (or £90,000 in London), you could be eligible for a Shared Ownership Mortgage, with which you buy a percentage of a property – say 25% – and pay rent on the rest.
If you are a First Time Buyer and would like some help with your first mortgage, call Asset Harbour on 01276 986333
*Original article from Money Supermarket