HOW DO I GET A MORTGAGE?
With house prices rising, taking your first step onto the property ladder may look harder and harder every month. We asked our teams for their top tips and answer the most frequently asked questions and put together a first-time buyer guide to help you overcome this.
Applying for your mortgage can feel like a convoluted process with a lot of paperwork, but getting your head around it early on makes it all much more straightforward. It is compulsory to provide evidence of income, credit commitments, past spending and, if you’re self-employed, you need to provide your tax returns and business accounts for the last 2-3 years.
After this, lenders will conduct an affordability assessment to examine your finances and credit history, to decide if you can afford the long-term repayments or not. It is imperative to check if you have a good credit score before applying for a mortgage because any red flags can lead to applications being declined, which in turn harms your chances of being accepted in the future.
STICK TO A BUDGET
The cost of living has been one of the property industry’s biggest talking points across the country. Rising inflation, fuel, and house prices are making it harder for households to save money, but the fundamentals still apply. Opening saving accounts and ISAs is the first thing you should do when trying to save for a deposit. Splitting your money across different accounts makes it much harder to accidentally overspend. Though it sounds unappealing, being strict with how you spend money is very important.
Fancy a takeaway? Have a home-cooked meal. Invited out by some friends? Get them round for a couple of drinks. It doesn’t have to take years to save lots – especially if you’re looking to buy with another person. The smallest deposit available for first-time buyers is only 5% (so £10,000 if the place you’re looking at costs £200,000). If you both save well, you could move in before you know it.
Saving more than the minimum deposit will give you a head start and also mean you will save on other costs such as solicitor fees, stamp duty tax, mortgages, and more, and you’ll have a lower interest rate.
ARE THERE SCHEMES FOR FIRST-TIME BUYERS?
Yes – there are lots of schemes to help first-time buyers get on the property ladder, and the ‘Help to Buy’ scheme is one of the best. This applies to everyone buying a ‘new build’ home and includes an equity loan, which is where the government loans first-time buyers and existing homeowners set amounts of money to help them to buy the home(s).
To qualify for the scheme, the property in question must cost £600,000 or less. If you meet the criteria, you will be able to borrow up to one-fifth of the property’s worth for the first five years following your purchase.
WHAT IS A LOAN-TO-VALUE?
A ‘Loan to Value’, or LTV, isn’t the money put towards a deposit. It’s the amount you’ve loaned to buy a property compared to the full price of said property. So, if you spend a deposit of £20,000 for a house that is priced at £200,000 and therefore have a mortgage of £180,000, your LTV is 90%.
The lower your LTV, the lower your interest rate is likely to be because lenders view smaller loans as smaller risks. Rates are usually lowest when you pay a deposit of 40%, which leaves 60% LTV. We have even more advice for first-time buyers and how to make it onto the property ladder, so call your local branch and our property experts will be happy to answer any queries you have.