Being a first-time buyer and taking your first steps onto the housing ladder can be an exciting time. However, there is so much to consider and think about as a first-time buyer. Here we have a first-time buyer guide for anyone wondering what lies ahead as you buy your first home.
What is a mortgage?
Someone is classed a first-time buyer if they are buying their first main residence, they will not have owed a freehold before or have a leasehold interest in property in the UK or abroad. A mortgage is a loan that is taken out by a lender, which is then used to buy your property or even land. A mortgage is paid off for up to 25 years, although this can be shorter or even longer.
The amount of loan in which you secure depends on the value of your first home, as well as taking into account how long it will take to pay back. In some cases, if you do not keep up with your payments, the lender can take back your home from you, to gain the money you borrowed.
How much deposit do I need to buy a home?
Before you even think of going ahead with buying, you need to make sure that you save up for your deposit. The general rule for deposits for your first home is that you will need to save 5% of the cost of the home you’d like to buy. If you look at buying a house at the price of £150,000 you will need to save £7, 500 to put down as your deposit. A top tip is that if you save more than 5% this will give you wider access to a range of cheaper mortgages available, meaning you might be able to gain a lower interest rate.
What are the different types of mortgages available?
What you might need to know is there are different types of mortgages available on the market, if you have a clear understanding of these, this will help you to make the right decision.
The first thing you must always think about is interest rates. Almost all first-time home buyers start out on a fixed interest rate, which will be for a set number of years. However, after these fixed years end you will then have to start paying your lender's rate, which means you could end up paying more. The other options you might want to consider are switching to a different mortgage with the same lender, or remortgaging with a completely different lender.
On the other hand, some lenders offer interest-only mortgages. Although these are not often available to everyone, this is more common if you are looking for a buy-to-let mortgage.
What happens during the mortgage application process?
When applying for a mortgage you will need to provide a number of different things such as:
- Your income
- Credit commitments
- Spending
- Tax returns and businesses account for the last ⅔ years
The application process when applying for a mortgage can sometimes take some time, which can also become confusing when you have to fill out many different forms. However, lenders will always have to carry out an affordability check. This includes looking at all your finances, which will determine if you can afford your long-term mortgage repayments.
How can you find a mortgage?
Applying for a mortgage can be done directly from a bank or building society. The other option is to think about using a regulated mortgage adviser. Using a regulated mortgage adviser will mean they have specific knowledge of this field, meaning they will be able to help you find the best mortgage that suits your needs. Using a mortgage adviser can be useful if you only have a small deposit, are self-employed or have any other unique circumstances.
What other costs do you need to consider when buying a property?
When looking to buy a property, there are other costs to consider apart from your monthly mortgage payments. Some of these other costs include:
- Survey costs
- Solicitor fees
- Mortgage arrangement and valuation fees
- Moving costs
- Building insurance
- Any additional furnishing and decorations costs
- Stamp duty costs
Summary
Buying a house for the first time is a daunting yet exciting process, it might be long but it’ll be worth it in the long run, it’s something everyone has to go through in their lifetime. If you want to find out more about the housing industry, Housing Digital is there to provide you with the latest news and information surrounding many different housing topics.
