Getting on the housing ladder is a big step and one that can be quite daunting to those new to the experience. There’s lots of things you’ll need to consider, check and research, but it’s something that all homeowners have gone through at some point, so you shouldn’t be overly worried.
Before you start anything, you’re going to want to work out exactly how much you can borrow. There’s no point finding a property that you might be beyond your means, so a quick calculation should give you the figure you need.
Typically speaking, depending on your personal circumstances, you’ll be able to get a mortgage for around 4 or 5 times your provable annual income. So, for example, if your salary is £30k per year, you’ll be looking at a maximum of around £150k. The overriding factor that will determine whether you can borrow 4x or 5x you salary is your credit status – the better it is, the more likely it is to be 5x.
Since the credit crunch of 2009, 0% or 5% mortgages aren’t really available anymore and many of the lenders have tightened their belts in the face of criticism over irresponsible lending. However, it’s not all bad news, as mortgages can see be obtained that are as much as 85% or even 90% to value.
To put that into perspective, on a £200k home, you would need a deposit of between £20k-£30k to apply for a mortgage.
We’re not going to lie, it is quite important that you have a good credit rating if you want to get a mortgage from one of the main, high street lenders. If your credit isn’t up to scratch, there are things you can do to boost it. Paying all of your bills on time is good start, as is operating your existing credit in a sensible and consistent way. Having a bad credit rating won’t necessarily stop you getting a mortgage, but it will make it more difficult to get accepted.
When you’re working out your affordability, there’s more than just the deposit and the monthly repayments to factor in. You’ll need additional funds for things like:
Not all of the above will necessarily apply, but it’s a good idea to think that every decision you make during the purchase process can cost you money.
Yes, if you are buying your first home in the UK, there are government schemes that offer incentives that do change from time to time. Currently, the Equity Loan or Help to Buy Scheme www.helptobuy.gov.uk can be used to reduce your costs significantly.
Under the terms of this scheme, which runs until 2021, as long as you have a minimum of 5% deposit, 20% of the purchase price can be borrowed without interest for the first 5 years.
If you’re looking to buy your first property and have any more questions, have a chat with one of our recommended brokers, who can talk you through your options. Things get a lot less scary once you’ve spoken to the professionals.