7 Top Tips for Buying Your First Home

Buying your first home is unlike any other transaction that you have ever been a part of. It can be a complete minefield and if you are going through the situation alone it can be very daunting and a difficult thing to do, although the vast majority of people will have to go through buying their first home at some point in their lives. Ashley King, one of our Financial Planners and our go-to Mortgage Advisor shares his top tips to consider when buying your first home below.

1. Get an idea of how much you can borrow first

There is nothing worse when it comes to buying a house when you find a property that you fall in love with only to find out that you can’t afford it or the bank won’t lend you the amount you require. Generally, as a rule of thumb, you can currently borrow around 4.5 times your annual income (if you are buying a house jointly, this will be both your incomes added together and multiplied.) So, for example, if you earn £20,000 a year, your usual borrowing amount would be £20,000 X 4.5 = £90,000 able to borrow. Banks and Lenders will then reduce this amount depending on your other commitments, such as credit cards, loans and car finance arrangements. Most high street banks have mortgage calculators on their websites you can use for free, so it’s a good idea to use one of those before looking at houses to get an idea of what value you should be considering to save any heartbreak further down the line.

2. Know your deposit amount

After the tough 12 months we have all had, the mortgage market is considerably different than where it was at the start of 2020. Previously, it was possible to purchase a house with as little as 5% deposit, but in 2020 it became essentially impossible to do this without further help, such as the Help to Buy scheme. 10% mortgages are now available, though the most common mortgages are currently closer to a 15% deposit. It will be worth looking at what products your chosen Lender offers to work out what Loan to Value (what % value of the house they will lend you) mortgage you will require. Your available deposit, plus the amount the bank will consider lending you will give you a good estimate of what value house you can buy.

3. Use trusted parties with good reputations to help you

Purchasing a property is a complicated and often long process as it features many different parties. These include yourself (the buyer), the seller (or Vendor), Estate Agent, your Solicitor, the seller’s Solicitor, a Surveyor, a Lender / Bank and often a Financial Advisor / Mortgage Broker as well. If you are in a chain, this is multiplied by each party involved. This is why it is important to have the right people by your side – Solicitors with good reputations around Conveyancing are a must. A good Financial Advisor will help you find the right Bank / Lender and also be able to help guide you through the process.

4. Get used to paying a mortgage and utility bills

Most people taking out a mortgage will be taking out the biggest debt they will have in their lives. For some people, including those who have previously rented, this will be a big adjustment as you become not only liable to pay the mortgage, but also the utility bills and maintenance of the house. Get a rough idea of how much your mortgage will cost each month, and how much your utility bills will be (Zoopla is good for estimating these), round these up to be cautious, and start ‘paying’ them each month as you go through the purchase process. Put the money aside, maybe into a savings account and this will mean you are used to paying a set amount each month. When you move in, you will already be comfortable with the outgoings.

5. Compare available deals

Whilst you may be comfortable with the Bank that you run your current account through (for a lot of people, they may have only ever used one Bank in their lives), they may not be the best Bank when it comes to your particular mortgage. All Lenders and Banks have different deals, interest rates and products at any given time and using a different Bank for your mortgage may save you hundreds of pounds a month compared to if you stay where you are currently. There are several comparison sites that can do this for you, though they won’t take your individual circumstances into account and the actual deal you get may be different to the one seen on a price comparison site. Alternatively, a Mortgage Broker or Financial Advisor will do this all for you as a standard part of their service.

6. Over-exaggerate all your costs

As noted in point 4, you will need to get used to a fixed monthly payment structure. When you are getting used to this, it is useful to round everything up to make sure you are prepared for the most expensive possible scenario. For example, if your broadband cost is £36 per month, try saving £40 per month towards this cost to ensure you are more than comfortable with it. This is the same for any work you require doing / furniture you are buying. If you get a broad idea of what these are going to cost, then round them up, that will cover you and make sure you’ve budgeted for those pesky hidden expenses.

7. Keep one eye on the future

Whilst the most important thing is getting your mortgage across the line now, you will more often than not enter into a fixed-rate deal with whoever your chosen Lender is for a period of time. What that essentially means is your deal (how much you pay monthly for your mortgage) will eventually run out and revert to a variable rate which is a) often higher than the fixed-rate and b) can change on a monthly basis giving you no certainty of how much your monthly repayments will be. If you set yourself a reminder to get in touch with your Lender / look at the marketplace as your fixed rate comes to an end, you can save yourself hundreds of pounds in higher repayment costs and likely bag yourself another good deal. Again, a good Broker / Financial Advisor will keep on top of this as part of their service to you.

The above should give you a good idea of what to look out for and what to be wary of when you start the process of wanting to buy your first home. Whilst it’s a complex and often difficult period, once you are in your dream home it will have been worth the wait, stress and cost as you are able to settle down and push on with your life.

If you have any questions on the above, or want the help of one of our expert advisors to guide you through the process, contact the office on 01282 452255 or email directly on ashley@financialaffairs.co.uk

covid-19 pdf cover

The Guide to Risk Resilience During COVID-19

We’ve put together a handy guide to help give you some clarity during this uncertain time. Click the link below to access the guide as a free download and get in touch today to speak to one of our friendly advisors.

Book a free consultation to learn more about how we can help you.