‘Mortgage ready!’

Get your finances fit to purchase your first home

“In order to buy your first home, you need to save a deposit. Your mortgage deposit will normally need to be for at least 5% of the value of the property you want to buy.”

DETERMINING HOW much money you need to buy a property may seem daunting for first-time homebuyers. To work that out, you need to consider how much of a deposit you will need, as well as considering other costs involved in buying your first home and moving.

It’s a good idea to consider just how much you really need to save as early as possible, so you can budget properly and avoid overstretching yourself financially. Let’s face it, it can be hard to save to buy a property, but not impossible.

START BUILDING A DEPOSIT In order to buy your first home, you need to save a deposit. Your mortgage deposit will normally need to be for at least 5% of the value of the property you want to buy. So if you want to buy a home costing £250,000, you’ll need to save up a deposit of at least £12,500. Ideally, though, you would save more than 5%. The larger the deposit, the wider range of mortgages you’ll be able to access and at more competitive rates. This is because with a larger deposit you’re perceived as lower risk by mortgage lenders.

SAVING A DEPOSIT WITH A LIFETIME ISA Lifetime ISAs can give your property savings a big boost. With a Lifetime ISA, you can save up to £4,000 annually (tax year 2022/23) with the government adding a 25% bonus annually. If you want to use a Lifetime ISA to buy a home, there are a few considerations you need to keep in mind. Only first-time buyers can use Lifetime ISAs to buy a home. That means you can’t own, or have owned, a home in the UK or anywhere in the world.

You’ll also need to be buying a home for no more than £450,000. You must be buying a home you plan to live in. The scheme isn’t for buying a home you want to rent out, or a holiday home, and you must use a traditional repayment mortgage.

CHECK YOUR CREDIT SCORE You’ll need to consider your credit score. This is because your credit score will impact your ability to obtain a mortgage. If you have a good credit score, you’ll likely be able to get a more competitive rate. However, if your credit score is poor, it could make it more difficult to obtain a mortgage or make it more expensive. Lenders want to see you are a reliable borrower when they are assessing your mortgage application.

That’s why it’s important to check your credit score before you start looking for a property. Once you know your credit score, you can start searching for properties that are within your budget. And, if you have a good credit score, you may be able to negotiate a better mortgage rate.

CLEAN UP YOUR CURRENT ACCOUNT Now it’s time to get your finances looking in good shape in preparation for when a lender starts looking. One of the most important things to think about are your monthly outgoings. You need to make sure that you have an accurate figure of your monthly outgoings so that you can budget correctly for your new home.

To get an accurate figure of your monthly outgoings, take a look at your bank statements and work out all of your regular expenses. This includes things like rent payments, utility bills, council tax, gym memberships, subscriptions, credit agreements and any other regular outgoing payments.

Once you have an accurate figure of your monthly outgoings, you can stop making any unnecessary payments and make sure that you showcase your finances in the best light.

UNDERSTAND THE COSTS OF BUYING AND OWNING A HOME There are a number of costs that you need to be aware of when buying and owning your first property. Some of the main costs involved start with saving for a deposit and Stamp Duty Land Tax (SDLT). However, as a first-time buyer if you are paying £300,000 or less for a residential property you will currently pay no SDLT. Between £300,000 and £500,000 you will pay SDLT at 5% on the amount of the purchase price in excess of £300,000.

There will also be legal fees and mortgage costs (valuation fees and arrangement fees), moving costs, contents insurance and home insurance. And once you finally own your first home, you’ll discover there are also a lot of other costs involved in running it that you may never have had to deal with before. This includes ground rent, service charges, ongoing maintenance costs and utilities.

LOOKING FOR HELP TO GET STARTED ON YOUR HOME OWNERSHIP JOURNEY?

Get your foot on the property ladder. We’re here to help you open the door to a place of your own. Talk to us about your mortgage options – contact The Official Mortgage Company – telephone 01777 809700 – email admin@officialmortgages.co.uk.

Your home or property may be repossessed if you do not keep up repayments on your mortgage.