Buying your first home may excite you but you may also find it overwhelming and confusing, especially if you have little knowledge about the process and legal requirements. With the right advice and guidance, your home buying experience should be far more manageable.
In this guide, you will learn about the essential things you need to do before buying your first home. So, let’s get started!
1. Prepare Your Home Deposit
The first thing you need to do before buying a home is to save up for your home deposit. Since a deposit is usually required before you can actually buy a property in the UK, most first-time homebuyers find this step quite challenging.
In normal times, homebuyers need to have at least 5% of the property’s purchase price deposit before they can have the property. But, as you will be aware, recent times have been challenging for many, and the demand for mortgages is so low, lenders now tend to require 10% of the property’s purchase price as a deposit. That’s quite a lot compared to before, so you really have to save up before buying a home.
2. Consider Ways to Boost Your Savings
As a homebuyer, you need to explore every means possible so that you can boost your savings for your home deposit especially as the higher the deposit you can put down, the lower the interest rate will be on the mortgage the lender may offer. The good news is that the UK government has this initiative wherein they can help you grow your deposit and help you buy your first home more quickly.
This initiative is called the lifetime Isa. You can apply for a lifetime Isa if you’re under 40, saving to buy a property worth up to £450,000. This program will allow you to save up to £4,000 each year until you’re 50, and for every £4 you save, the government will add £1 to your savings.
Once the government bonus has been paid into your Lifetime ISA account, you can invest it just like your other savings and will be able to earn interest or get investment growth on it. If however you do not use the fund to purchase your first home and withdrawal is made before the age of 60, penalties will apply.
3. Know How Much You Can Borrow
It’s totally understandable if your savings will not be enough to purchase a property outright since property purchase truly expensive. Fortunately, you can apply for a mortgage. However, you need to know how much you will be able to borrow so you can gauge how much you still need to save up as a deposit. Usually, lenders will allow you to borrow up to a maximum of four and a half times your income. You can calculate your borrowing power using a borrowing calculator or consult an adviser on which mortgage products fit your needs. Do note that these calculators should be used as a guide only and lenders criteria may differ.
4. Explore Mortgage Options
It can be challenging to save any deposit to buy your first home, and the relative scarcity of 95% mortgage deals is still weighing heavily on the market. Fortunately, most lenders also offer 90% deals, Help to Buy, shared ownership or guarantor mortgages.
One of the mortgage options you may wish to explore is the guarantor mortgage. Here, you can ask a family member to use their savings or property as collateral so that you can purchase a property. There are other deals available, but it’s always best to consult your mortgage broker about what kind of deal is best for you.
While buying your first home is such an exciting journey, you still need to face a daunting process, which you need to prepare for. This guide will help you come prepared before buying your home. Aside from doing these essential things, it would also help if you have a reliable and accessible mortgage broker with whom you can consult on your first-time home buying plans.
If you are looking for the best mortgage brokers in Chester, you’ve come to the right place! A Move Brokers has a team with decades of experience in helping first-time buyers take that first step onto the property ladder, making the process of getting your first mortgage as simple and as stress-free as possible. Get in touch with us today to arrange a free initial consultation!
As a mortgage is secured against your home it may be repossessed if you do not keep up the mortgage repayments.