Posted on December 4, 2014 at 12:44 pm by BeeMyMinder
First time buyers’ guide
Buying your first home is exciting, scary and confusing. With all the documents, figures, mortgage lenders, advisers, it’s understandable why people feel daunted by it all.
Here’s part one of our first time buyers’ guide that should help those who are looking to purchase a property.
What exactly is a mortgage?
A mortgage is where a lender (a bank for example) loans you a certain amount of money so you can buy a property. Unless you have the whole cost of a home in savings or earnings, you will need a mortgage.
How much can I borrow?
This depends heavily on a number of factors, but primarily, how much deposit you have and how much you earn. There is no set amount, but a mortgage lender will take a look at your outgoings etc and work out how much they think you can afford. People often get a mortgage with their partner or sometimes a friend, as two incomes is better than one in a lender’s opinion.
How much do I need for a deposit?
It is recommended that before you start looking at purchasing, you should save at least 5% and aim for 20% of the cost of the home you’d like. Having more than 20% is even better, the higher the deposit you have, the less you’ll have to borrow, at a lower mortgage rate and in-turn, the quicker you will pay your mortgage off.
Previously, those with less than 10% deposit would really struggle to get a mortgage, but recently the Government’s Help to Buy Scheme has meant that a 5% deposit is more widely accepted. However – the rates for this are quite high.
What is an LTV?
When you look at different mortgages, you may see the term ‘LTV’ – this stands for Loan-to-Value ratio, which is the proportion of the property’s value that you are borrowing. For example, a 90% LTV means you have a 10% deposit.
Other things to think about
It’s all very well having a deposit, a property you’d like to buy and a mortgage lender you want to borrow from but there are other fees and payments you need to consider:
- Stamp duty (a percentage of the property paid straight to the Government) – these have just changed read here.
- Mortgage arrangement fees
- Solicitor’s fees
- Survey costs
- Home insurance
It is recommend that you save up extra money to be able to afford all these fees, this amount will depend on factors such as the lender, estate agents and cost of the property.
The process of purchasing
The actual purchasing of a house goes a little something like this (although this can vary on whether your house is a new build or part of a scheme for example)
- View house and put in an offer – usually via an estate agents
- Once the offer is accepted by the sellers, you will need to organise a solicitor and surveyor
- A surveyor will do a valuation survey – ensuring the property is valued correctly
- You will then apply for a mortgage*
- The lender will ask for evidence of income and outgoings
- Once approved, you will usually pay an arrangement fee
- Exchange of contracts – this is when everything becomes final
- Completion – this is usually around 4 weeks after the exchanging of contracts and involves you paying the deposit and all the final fees and bills
- Moving day!
*with the fast pace housing market, some people get their mortgage agreed in principle prior to doing their property searches
The ‘Mortgage Anyone?’ blog will be an informative read as well, as it steps you through securing an actual mortgage, including helpful calculators, comparison sites and some words of wisdom!.
Part two of our first time buyers’ guide will include information on the different types of mortgages!
If thinking about buying your first house? You can use the BeeMyMinder policy storage system for your outgoings and this will help you work out how much you can afford.
BeeMyMinder also has FCA independent advisors on hand to guide you through the murky-mortgage-waters. So simply contact us and they would be happy to help you.