It pays to save when it comes to your first home

HOME AD­VICE With Alex Neill of Which? The more you can put down up front, the lower your in­ter­est rate when you sign that mort­gage

Star Courier (Surrey & Hants) - - FRONT PAGE -

First time home buy­ers are saving for up to ten years for the de­posit that’s es­sen­tial for get­ting that first step onto the hous­ing lad­der. This re­search, from Which? Mort­gage Ad­vis­ers, also shows more than two out of three save for at least two years while 37 per cent were helped fi­nan­cially by their fam­ily – usu­ally par­ents.

Some lenders in­sist on 25 per cent – vir­tu­ally all de­mand at least five per cent.

But whether it’s your first pur­chase or not, there’s a sim­ple rule – the big­ger your de­posit, the lower the in­ter­est rate.

Here’s how it works with one ma­jor high street lender on its four year fixed rates.

If you’ve got 40 per cent of the pur­chase price, you could pay 1.79 per cent. If you have 30 per cent, it goes up to 2.04 per cent, with a 15 per cent de­posit, you pay 2.29 per cent, save up a tenth of the price and you’ll pay 2.55 per cent, while some­one with a min­i­mum five per cent has to pay 2.79 per cent.

Over the four years, you would pay roughly £ 4,000 ex­tra in in­ter­est on the min­i­mum de­posit with this bank rather than the 40 per cent for each £ 100,000 bor­rowed. That’s £ 1,000 a year or about £ 20 a week.

There are lit­er­ally thou­sands of mort­gages from hun­dreds of lenders – rang­ing from high street names to firms only spe­cial­ist fi­nan­cial ad­vis­ers have ever heard of. And while the num­bers vary, the prin­ci­ple that the more you save, the less you pay holds true.

But there’s a sec­ond hur­dle to jump be­fore you can get that money.

Home loan com­pa­nies have be­come fussier over who they will lend to. This sounds tough but it pro­tects you as well as them – they don’t want to of­fer money to some­one they think they might have to re­pos­sess.

Th­ese mort­gage lend­ing cri­te­ria vary in de­tail but a typ­i­cal high street bank will in­sist on at least three years’ res­i­dence in the UK, at least three months in your cur­rent job plus at least a year in con­tin­u­ous em­ploy­ment, or three years’ worth of ac­counts if you are self em­ployed, or ev­i­dence that a a se­ries of con­tract jobs will con­tinue.

They’ll prob­a­bly be happy with in­vest­ment in­come or pen­sions as long as they’re reg­u­lar.

All lenders will add your part­ner’s in­come to your own – only some will al­low you to add friends, but oth­ers are fine with close fam­ily mem­bers.

They’ll also pay close at­ten­tion to out­go­ings – credit cards, car loans, other debts, trans­port charges and child­care.

Some are even said to have asked if you have ex­pen­sive hair styling!

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