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Essential Do’s & Don’ts when getting a Mortgage!!!

Essential dos and don’ts when getting a mortgage and becoming first-time home buyer

DO ask yourself if it’s what you really want

Owning a property rather than renting will almost certainly make you better off in the long term. However, home ownership isn’t for everyone. You’ll need a big chunk of capital to put down a deposit on your first home and there are lots of extra costs when you buy rather than rent. From buildings insurance to buying new furniture and fittings. Above all, do your sums properly, and then do them again. If you think you’ll be busting your budget by becoming a first-time home buyer, it may be better to carry on saving before taking the leap.

DO research what deals you can get as a first-time home buyer

Being a first-time home buyer can be very daunting. Buying a home is almost certainly the most expensive thing you’ll do in your life. So it’s good to know that there are a range of government schemes to help you get a foot on the property ladder. These include Help to Buy and Shared Ownership.

DO save hard for that deposit

The biggest factor when it comes to which mortgage rate you can get is the size of your deposit. This is the percentage of the property’s overall value you can afford to put down as a lump sum. Therefore, it’s extremely important to save super-hard and maximise your deposit before taking the plunge. Fortunately, a small deposit doesn’t necessarily stop you being a homeowner. There are plenty of government schemes to help a first-time home buyer get on the property ladder (see above). Bear in mind that a low deposit will mean a jump in rates. So the more you can put down, the better.

DO make yourself credit-check worthy

One of the main goals when it comes to securing a mortgage is to get the best interest rate on your loan. But to get that rate, you need to make sure your credit history is as clean as can be. This means having a good credit rating is crucial when it comes to mortgage applications. In the UK, there are several credit reference agencies (CRAs) such as ClearScore, Experian, Equifax and CallCredit, and each will hold a file on you called a credit report. The report has a footprint of your credit history (credit cards, loan agreements, mobile phone contracts, etc). Check as many as possible before applying for a mortgage, address any mistakes and cancel any unused credit cards that show up.

DO know your timeline and be flexible

Recent research shows that it takes the average person just 27 minutes to decide whether to buy a property after viewing it.But that’s only the beginning of an often long and drawn-out process. By all means get excited when you finally get shown round your dream home, but keep your head and don’t try to rush things. There will inevitably be hiccups during the buying process, so stay flexible and make sure you root out the best deal. Whether that’s finding a brilliant mortgage or negotiating a discount on the asking price.

DO step away from the comparison sites

To get an accurate view of what you can afford, use a mortgage calculator that adds in all the costs you’ll pay. These are free and shouldn’t come with credit checks. Avoid comparison websites or ‘best buy’ tables that show you different products and interest rates. There’s no way of telling if you’ll actually be eligible for them by putting in just a few details.

DO get your documents ready in advance

This can help to move your application along much, much faster. And not having them ready is unfortunately one of the most common reasons why an application gets held up.

Documentation for first-time home buyer mortgage applicationDocuments include high-resolution scans of:

Proof of salary (payslips, or SA302 forms if self-employed)
Proof of address (council tax/utility bill)
ID (passport or driver’s licence) and bank statements

DO consider your existing debts

You’ll increase your chances of getting a decent mortgage by paying off as much outstanding debt as possible before making your application. Personal debt won’t necessarily stop you from getting a mortgage, but it will affect the amount a lender is willing to offer you. To make sure you can afford a mortgage, lenders look at your disposable income. If you have large monthly repayments to make – car finance, credit cards, student loans, etc – it will reduce the amount of income you have to spend on your mortgage.

DON’T forget stamp duty

Stamp duty can be a pretty hefty extra on top of the purchase price of the property you’re buying. The good news is that properties under £125,000 are exempt. But the bad news is that the average purchase price among first-time home buyers in the UK was £205,170 in 2016. The tax applies to both freehold and leasehold properties – whether you’re buying outright or with a mortgage. There are several rate bands for stamp duty and the tax is calculated on the part of the purchase price that falls within each band. (0% on £0-£125,000; 2% on £125,000-£250,000; 5% on £250,001-£925,000 and so on). So let’s say you buy a house for £275,000, the stamp duty is £3,750. Oh, and you only have 30 days to pay it after purchase (your solicitor will usually deal with the stamp duty return on your behalf, but double-check).

DON’T settle for a bad mortgage deal

Like anything, it pays to shop around when it comes to mortgages. A smart way for a first-time home buyer to do this is through a mortgage broker. Many charge fees, so look beyond your neighbourhood broker.

DO compare the costs of moving

As completion day on your new home approaches, sundry costs such as council tax, home insurance and removal fees can quickly mount up. So make sure that you plan for these well in advance and get the best price you can. Make a budget and include everything from removal fees and mail redirection to buildings insurance and council tax. And remember, you don’t have to stay with the same utility companies as the previous owner, so shop around and get the best deal on everything from energy to broadband.

DO remember – you can remortgage when you’ve bought your home!
Remortgaging is just like switching your energy, mobile or broadband provider, only with much bigger returns. If you’ve had a mortgage for more than two years your introductory offer could have expired, leaving you on an SVR (standard variable rate). What does that mean? When your fixed term ends (usually two years or five years), your initial rate is over and you’re then switched on to your lender’s standard rate – which is usually significantly higher. You could possibly save thousands – yes, thousands – of pounds a year just by switching to a new lender!!!!