You’ve made the decision. You’re ready to take the plunge and become a homeowner. Scary, right? Because we don’t want you to get into a mortgage minefield or an over payment pickle, we’ve created a financial checklist that you can go through to ensure that you’re 100% ready to step onto the property ladder and you’ll be able to afford your decision.
1. Remember extra costs
As well as having your deposit saved up, which should be at least 10% of the price of the house you’re looking to buy, you should aim to have up to £5,000 contingency in the pot for the extra costs associated with moving house. These aren’t really hidden costs, they’re simply ones that pop up along the way and they’re not always welcome! It’ll be a lot less stressful if you already have the money saved up for these costs and don’t have to scrabble together the pennies to pay them once you’re already in deep with your application.
Everything from admin, searches and surveys have associated fees. The valuation of your property costs money to make sure it’s worth what you’re offering to pay for it, insurance and solicitors fees are also added costs. Moving fees, cleaning your previous place and furnishing your new home all add up. Luckily, at the moment you won't have to pay Stamp Duty unless your home is over £500,000. Prior to the June 2020 Budget if you were a first time buyer you wouldn't have had to pay Stamp Duty on any property up to the value of £300,000. At the moment there is no update as to when or if this will change.
Checkpoint 1: Do you have an extra savings pot for these charges?
If not, check out our #SavingSwaps and savings tips for that extra boost to get you there.
2. Is your credit score up to scratch?
You might have a deposit saved up and you could be awesome with scrimping and saving but, if your credit score isn’t up to scratch, you won’t be accepted for a mortgage unfortunately. Your credit score is an analysis of your personal credit files to represent whether you’re reliable enough to repay credit that you’ve been lent.
Your credit history is a record of your borrowing and responsible repayment of debt. This includes overdrafts, credit cards and phone contracts amongst other things. Credit score tests are run and are linked to an identity check so you’ll need to make sure that you’re on the electoral roll, even if you’ve moved around in rented properties or student accommodation. If you’re not on the electoral roll, you could fail the credit score test. Our mortgage advisers will give you tips on how to get your credit score up to scratch and you can visit the Money Advice Service for further advice.
Checkpoint 2: Are you familiar with your credit score? Are you on the electoral roll?
Make sure these two are on point and you’ll be a step closer to the property ladder.
3. Can you afford the monthly payments?
As well as your monthly mortgage repayments you will have to take into account the ongoing costs that you will have to pay. You’ll need to factor in council tax, utilities that may be higher if you’re moving into a house from a flat, maintenance and repairs including anything you want to do as soon as you move into the house. Our mortgage calculator will help you quickly work out how much your monthly payments could be based on how much you are ideally looking to borrow, your lender fees and how long you would like your mortgage to be over in terms of years.
Checkpoint 3: Do you earn enough to be accepted for a mortgage and will you be able to afford monthly bills?
Remember that overtime and bonuses aren’t taken into account when lenders look at whether you’re suitable for a mortgage because they work on a worst-case scenario and whether you’d be able to pay your mortgage if these were no longer available.
Think you’ve got everything in order from these three checkpoints? If you’ve ticked all the boxes, now’s the time to speak to a mortgage adviser and hopefully you won’t have too much of a shock when they speak to you about the above points. Nottingham Mortgage Services can help first time buyers with advice on finding the right mortgage and they search over 60 lenders to find the right mortgage for your needs.
Once you’ve spoken to an adviser from Nottingham Mortgage Services you’ll be ready to create a mortgage application and they’ll be there to help you along the way. Take advantage of their expertise because they’re there to offer you advice. Still baffled by all the technical terms and abbreviations? Never hesitate to ask your adviser if you do not understand a stage of the process.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
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