Young people face a difficult choice when it comes to buying their first home. Whilst owning your own home is still a strong trend in the British economy many people are struggling to get on the property ladder. With the cost of living spiralling and many still paying off their university debt, finding the money for a deposit can be difficult.
Yet you should not give up your ambition of owning your home. To help you out I have dedicated my latest Blogs to helping first time buyers. In my last Blog I included some information regarding grants and other government support available, today I am including the main issues you should consider when embarking on your journey:
Finding the right mortgage: There is a great variety to choose from, the below points are key;
- How much you can borrow: This is one area which was largely affected by the introduction of affordability checks in 2014. This means lenders will consider your monthly income and outgoings as well as a considering affordability against increased interest rates. If you want to work out roughly how much you can borrow there are many calculators available online.
- Deposit: The days of 100% mortgages are gone and you will need to save at least 5% of the property value for your deposit. If you cannot find the deposit some lenders are now offering ‘Family Assist’ mortgages where family savings could be used as a security. Whichever way you go it’s important to note that the higher the deposit the better the mortgage deals available to you.
- Variable or fixed rates: Whilst variable rate mortgages often carry a lower interest rate, fixed rates are often preferred by first time buyers due to fact that they allow you to plan your budget. You can usually fix your mortgage deal for 2-5 years and you will need to consider your future plans as well as market conditions.
Improving your credit rating: This has become more important than ever and will ensure you are able to get a better mortgage deal:
- Get on a Roll: The electoral roll is one of the key sources of information for credit agencies and lenders – and vital to verifying your identity. If you are not on it, it can be very difficult to get any credit at all. And it’s vitally important that your address on the roll is accurate and up-to-date.
- Know your credit every time you apply – and space out your applications: Before you apply for any form of credit, make sure that you know whether there is anything in your credit rating that might cause you to be rejected. Checking your rating with agencies like Equifax or Experian costs £2 or less – and it can have a big impact on your future ability to take out loans or mortgages. When you apply for a financial product, the lender will ask permission to check your credit file – and if they reject you, the search that they conducted could be a factor in any future lending decisions.
- Play your cards right: If you have credit cards (including store cards) that you don’t use, the lines of credit will still be shown in your file – and some lenders may worry that you have too much potential credit available to you. It makes sense to cancel any cards you no longer use and check your credit file to make sure the changes have been logged. Don’t do this if it will mean overloading your remaining cards though, as lenders also look at the percentage of your available credit that you use.
I hope this has given you a better understanding and will help research and considerations. Should you want some advice or need some immediate help, visit our website for more information or get in touch to arrange an initial appointment at a place and time to suit your busy schedule.