If you’re a first time buyer and completely new to the property market, simply follow our guide below so you know exactly what to expect…
1. Find out about your mortgage options
A mortgage is essentially a big loan, from a lender, lent for the specific purpose of buying a property. The loan is secured against the property which essentially means that until you have paid back the loan (and the interest!) if you don’t keep up with your mortgage repayments, the lender can take back possession of the property and sell it again to get their money back.
There are lots of different types of mortgage and for any home buyer it can be confusing – never mind first timers! The three main types that you should understand are:
Fixed Mortgage – this means the interest rate and repayments are fixed for a specific period of time, usually at least 2 years for first time buyers.
Variable Mortgage – this means the interest rate, and you’re as a result your repayments can change at any time but the risk factor usually means you get a better a deal.
Tracker Mortgage – this is where your interest rate tracks The Bank of England’s base rate, so it can fluctuate. Again the risk factor means you usually get a lower rate.
2. Find out about your ownership options
There are a range of ownership options that can make buying your home more affordable. Most first time buyers get a joint mortgage with their partner. If you are both going to live there and have put in equal shares, it makes sense to share the costs and responsibility of the mortgage. It also means that your combined salaries may mean you can borrow more.
There are other options, including shared ownership where you only buy half the property and rent the other half. This means you’ll only need half the deposit, and you’re mortgage will be less, but your rent could fluctuate and it is sometimes difficult to sell on.
3. Check your budget
Draw up a budget weighing your income against your outgoings. Include utility bills, council tax, insurances, car and travel costs, food, entertainment, phone and internet, and everything else you may pay, and see how much is left over. You can work out how much you think you can afford to pay back on a monthly basis from this.
Remember that if you are used to renting you may now have to foot a few unexpected bills, so if your boiler or washing machine breaks down – if you don’t invest in insurance for these things you’ll have to pay for household repairs and replacements, so it’s a good idea to allow for monthly savings too!
4. Find out how much you can borrow
Most first time buyers will need a minimum of a 10% deposit, and the lender will offer a mortgagee for the other 90%, so it will depend on how much of a deposit you can put down. For example, if you can get together £10,000 for your deposit, you should be able to buy a house valued at £100,000, with £90,000 mortgage. But the maximum amount will vary depending on you as an individual and your situation. If you have a bad credit rating, a lot of debt or a low income, your lender will limit the amount they will lend to you, which means you will need a bigger deposit to afford the house you want or you’ll have to buy a cheaper house.
5. Don’t forget about the extra costs
Many first time buyers find the extra costs daunting and confusing, but they are actually fairly straight forward:
Deposit -10% of the price of the property.
Estate Agent fees – advice fees for helping you find your home, not always applicable.
Solicitor fees – Find a solicitor that will carry out their duties for a set price. This should include arranging and paying for your land registry fees and local authority searches (both necessary for your lender to agree to lend on the property).
Lender fees – your mortgage lender will usually charge you an arrangement fee on your mortgage, but can sometimes add this onto the amount lent, so you don’t need to worry about finding the extra money. They will also assist on having the property valued and surveyed to ensure it is worth what they are lending for it. You will have to pay for these before the mortgage is agreed.
Stamp Duty – only applicable if your property costs £125,000 or more and is a government tax of between 1-15% of the price of the property. Your solicitor will advise you if this is the case.
6. Apply for a mortgage – AIP
Applying for your mortgage is the simple part! If you have a financial advisor they will do this for you, find the best mortgage available and even fill out your application form for you. If you are approved, they will offer you an Agreement In Principle (AIP), which is effectively a promise that they will lend you a certain amount so you can confidently make an offer on a property.
7. Find your property
Once you have AIP, you can find your perfect house, taking into account your budget and your AIP amount, and when you’re sure, you can make an offer!
8. Offer accepted!
If your offer is accepted, you will need to go back to your lender and confirm your mortgage. They will then require the surveys and valuation, but so long as everything goes well, they will give you your mortgage.
Your solicitor will handle the payments, so you will have to hand over your deposit to them and them will receive the mortgage money from the lender and then transfer it to the seller’s solicitor, so you won’t actually see it or deal with it.
9. Exchange contracts
Once everything is paid and agreed, your solicitor will arrange the exchange of contracts and completion of sale. This is the last part of the process as soon as it’s done you can get your keys and your new home will be all yours!
10. Move in!
All that’s left is to turn your new property into a home! If you’re lucky, you can move straight in and all you’ll need to do is hire a trusted removals company to pack all your belongings quickly and carefully and transport them to your new home! They should help you unload and carry all your belongings into the right room, so you don’t even have to worry about the heavy lifting.
If your new home needs a bit of work, you might find that you need to place the majority of your furniture and belongings in to temporary storage to keep them safe, clean and out of the way while you renovate.
Moving your home or business needs help from people you can rely on.Clockwork Removals London‘s customer care is built around our people and everyone has a dedicated role to play in your move.