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First home buyers – mortgage hunting
A Deposit is the down payment on your property. It provides you with some equity and the knowledge that if you sold in a good market you would get that back minus any professional fees you pay.
SAVING A DEPOSIT
Even if you have landed that high paying job and know you can afford large repayments, a deposit proves that you are not someone who spends everything they earn on lifestyle and also proves that you have the ability to save and not spend should things get a bit tight over the years.
A savings vehicles that has been identified is the ‘Lifetime ISA’ which is a government backed scheme provided by some savings/investment providers allowing you to save £4000 a year and the government would add a bonus of £1000 (or 25% of your total savings for that year). You will need to be between 18-39 years old. The ISA can be a cash or stocks and shares ISA or a mixture of both. Lifetime ISA’s once opened can be deposited into until you turn 50 years old and withdrawals can only be made to purchase a house or if you turn 60 years or you have a terminal illness with less than 12 months to live. For further information https://www.gov.uk/lifetime-isa
Some of you deposit can be gifted by your parents and grandparents. Refer to this government website for gifting allowances https://www.gov.uk/inheritance-tax/gifts
THE MORTGAGE HUNT
Finding the right mortgage advisor is probably the most important thing you will do before anything else when applying for a mortgage. This person is the go-to person before, during and after purchasing a house (they are typically not just for one transaction).
Firstly, consider where and who you are dealing with regarding the mortgage advice you are being provided with. Is it important that the mortgage advisor is not employed by the company selling the property?
Is it important that the mortgage advisor has a range of different lenders and products?
Is the mortgage advisor face to face, Over the phone or even web based?
Consider the products available on the market – so Bank or mortgage advisor?
Is it important that there is no conflict of interest when buying the property between you, the estate agent (who works for the seller) and mortgage advisor?
These are questions you need to consider because once you have a mortgage its long-term debt in most cases and is the mortgage advisor going to help service your requirements in the future?
Secondly (other help available)
So, once you have saved a deposit say 5-10% of a property you can apply for a mortgage with some sense of optimism. There are some lenders that will lend up to 100% but in exceptional circumstances.
The government also has another scheme called ‘Help to buy’ where the government provides you with an equity loan of 20% to 40% of a property value. In London, say you find a property for £400,000 and you have £20,000 (5%) The government would lend you £160,000 interest free for 6 years and you would need a mortgage of £220,000. The Help to buy equity loan needs to be repaid in 6 years’ time, so remember this as it is not well communicated on government websites.
Some lenders also provide family based mortgages which offer guarantor and secured deposit type mortgages (family offset mortgages) . Speak to your mortgage advisor who should be well versed in such products.
PUTTING AN OFFER IN
The next step is actually putting the offer in and seeing if it gets accepted. That’s up to you and what you can afford now you are approved for a mortgage (plus any scheme or family assistance you may have chosen).
. Be sure to read about different types of property because there are types of property that lenders won’t lend on, or require higher deposits such as brick builds, property with structural issues, some ex council properties, some high-rise properties and short lease hold properties. Ask your mortgage broker if you are unsure because they can advise you whether there are lenders who can help.
You will need to choose a Conveyancing Solicitor to undertake water, land registry, chancel searches among many other types of checks involving all the legal aspects of transferring the ownership of a property from a seller to a buyer and registering the mortgagor’s interest in the property.
They also normally arrange the payment of stamp duty to HMRC after completion (when funds have been transferred and keys handed over)
Note: Prices differ depending on the complexity of the property.
CHARTERED SURVEYOR: This is purely your decision and is recommended. You are able to get a condition report to check that the property is in good order, a full property survey detailing some searches and a home buyers survey.