Updated: Oct 12
Thinking about getting your very first property, that you can call home? We know how exciting it is to be a first time home buyer but there are many details that come before that special day. Buying your first home is scary and you may be feeling a bit overwhelmed by the whole process... Don’t worry, that’s why we’re here! We’ve put together a few frequently asked questions that someone in your position might ask... here's what to do as a first time home buyer
Save up for your deposit
Deposits start from just 5%, but just be aware that the more deposit you can get hold of, the cheaper your rate is going to be. If you could put down a 10% deposit you would save a little bit more money, but 5% is where you need to be starting. On top of that, you will need between £2-2.5k for your legal costs, valuations and mortgage fees (on a property value up to £300k).
What does ‘LTV’ mean?
Loan to Value in basic terms is the amount of money the bank is giving you as a mortgage as a percentage of the cost of the property. All lenders work in these to work out how much risk is involved in a property. Say for example you had a property that cost £100k, if you only had a £10k deposit (10%) then that would be a 90% loan against the property – this is seen as riskier to lenders than if you put in a deposit of £50k (50%).
How much money can I borrow?
It will vary from lender to lender and depend on income, debt and a whole host of other factors. A first time home buyer with no debt and fair income could on average be able to borrow up to between 4 - 4.75 x your sole or joint income, there is a lender at the moment offering up to 5.5x your sole/joint income if you take on a longer fixed term rate with them.
How can I boost my credit score?
First, close any accounts that are open that are no longer needed.
Another way to boost your credit score is to get an entry-level credit card and use a little bit of it every month but remember to pay it back each month! If you do get a credit card you need to be careful with how close you get to the limit, for example, if you had a card with a £1k limit and spent £900 in a month you will look as if you are getting too close to your limit which can cause your credit score to drop down quite a lot. In comparison, if you spent that £900 on a card that had a £2k limit then it wouldn’t be an issue at all as you aren’t close to the limit. To get past this you should try and keep your spending on your credit card low, so if you had a card with a limit of £1k try not to go over 50% of the available credit. Spending on little things like food or petrol and paying it back each month will prove to the lenders that you are reliable at managing your money. You could have spent all that money but have chosen not to.
Another way is to make sure any issues with things such as credit cards or mobile contracts are paid before you decide to dispute it as it could show up on your credit history as a late payment which could negatively affect you.
Check your credit score regularly – we have previously had clients that received a parking ticket just as they moved house, which ended up being a CCJ, the only found out three years later when applying for their first mortgage!
We would urge you to use CheckMyFile as it uses all the credit reference agencies and will help you work out exactly what the lenders are looking for.
Read our blog to learn more ways to boost your credit score -https://www.mortgagemonster.co.uk/post/how-to-boost-your-credit-score
Can I move when my deal ends?
When your deal ends, you'll have a few options.
You can stay with the same lender (a bit like accepting your insurance renewal) and choose from what they can offer, this can be quicker and easier than a remortgage but you may not get the best deal.
The next option is to remortgage. This is moving your outstanding mortgage to a new lender looking at options from all lenders finding the very best deal!
Around 3 months before your deal ends, we’ll start to get ready so that the day the lender tries to put you on the variable rate (usually 4-5%) we'll whip you away to your new lender and get your newer cheaper deal to start right away.
Please, please, please do not stay on your variable rate for the next 25 plus years!!! Our aim will be to get the best deal possible throughout your whole mortgage life! We want to be with you from your first mortgage until you're mortgage free!
We know there’s a lot to do as a first time home buyer, its stressful and this isn't a subject that you cover in school, it’s perfectly acceptable, you’ve never done this before!
We however are pretty good at this, even if we do say so ourselves! We know that you won’t have got all of the answers from this blog alone but if you keep up to date with our social media accounts and pop in to see us you’ll understand what you’re doing in no time and be well on your way to being mortgage happy!