Bricks and money First mort­gages, find­ing a good builder and more

Ap­ply­ing for a first mort­gage can be daunt­ing. Here’s how to make the process eas­ier

House Beautiful (UK) - - Contents -

SE­CURE THE DE­POSIT

‘Sav­ing for a de­posit can be the most dif­fi­cult part of tak­ing that first step,’ says Char­lotte Nel­son at Money­facts (money­facts.co.uk). You’ll need at least five per cent of a prop­erty’s value to ob­tain a mort­gage. The big­ger your de­posit, the bet­ter deal you’re likely to get. ‘There are govern­ment schemes that can help,’ Char­lotte ex­plains. The Help to Buy ISA is avail­able to first-time buy­ers of any age who can save up to £200 a month in this scheme, and will re­ceive a bonus of up to £3,000. The Life­time ISA al­lows peo­ple aged 18-39 to save tax-free up to £4,000 pa and the Govern­ment will top this up by 25 per cent. This pot can be used either to­wards a first home or a pen­sion.

BE­FORE YOU AP­PLY

Check you’re on the elec­toral roll at your cur­rent ad­dress, get your last three months’ bank state­ments and payslips, and your P60 if you’re em­ployed or a SA302 if you’re self-em­ployed, and make a list of all in­com­ings and out­go­ings.

Lenders may use dif­fer­ent sources to in­ves­ti­gate your credit his­tory, so check your credit re­port with sev­eral agen­cies such as Equifax and Ex­pe­rian. Chal­lenge in­cor­rect in­for­ma­tion and close un­used bank or credit ac­counts. If your credit score is poor, start to pay all your obli­ga­tions ev­ery month and com­mit to im­prov­ing your rat­ing. ‘Fi­nally, en­sure you’ve re­ally saved enough for a de­posit, as mov­ing costs such as stamp duty, sur­veys and so­lic­i­tors’ fees will add thou­sands,’ says Char­lotte.

WHAT KIND OF MORT­GAGE?

The choice is huge, but David Holling­worth at Lon­don & Coun­try Mort­gages points to two main op­tions: fixed rate, where the in­ter­est rate is capped for two, three, five or 10 years; and vari­able rate, in which it can go up or down, de­pend­ing on fluc­tu­a­tions in the base rate. ‘First-time buy­ers of­ten pre­fer a fixed rate so they can bud­get with cer­tainty,’ says David. Re­search the banks and build­ing so­ci­eties, and take ad­vice from an in­de­pen­dent fee-free mort­gage bro­ker. A stan­dard term is 25 years but some lenders of­fer 35 year terms to help you spread the cost.

CON­SIDER THE AL­TER­NA­TIVES

Buy­ing a new-build home could make sense. The Govern­ment’s Help to Buy eq­uity loan scheme al­lows bor­row­ers to put down a five per cent de­posit and get a loan of up to 20 per cent (40 per cent in Lon­don) of the prop­erty’s pur­chase price for the rest. Shared own­er­ship deals mean you buy a por­tion of the prop­erty and rent the re­main­ing part. Or if you can take ad­van­tage of the ‘bank of mum and dad’, opt for a guar­an­tor mort­gage. ‘This lets either a par­ent or rel­a­tive as­sure a mort­gage in the event the de­pen­dent fails to make the re­pay­ments,’ Char­lotte ex­plains. ‘This of­ten means first-time buy­ers can bor­row more than the bank would nor­mally al­low as their cri­te­ria is of­ten less harsh for th­ese types of deals.’

There’s help avail­able for first-time buy­ers

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