Taking your first step onto the property ladder may feel like it is getting harder and harder every month but it doesn't have to be that way. We asked our teams for their top tips and answer the most frequently asked questions and put together a first-time buyer guide to help you overcome this hurdle:
Applying for your mortgage can feel like a convoluted process with a lot of paperwork, but getting your head around it early on makes it all much more straightforward. It is compulsory to provide evidence of income, credit commitments, past spending and, if you’re self-employed, you need to provide your tax returns and business accounts for the last 2-3 years.
After this, lenders will conduct an affordability assessment to examine your finances and credit history, to decide if you can afford the long-term repayments or not. It is imperative to check if you have a good credit score before applying for a mortgage because any red flags can lead to applications being declined, which in turn harms your chances of being accepted in the future.
Opening a Lifetime ISA (Individual Savings Account) is one of the best things you can do to help save for a deposit for your first home. Not only is it a great way to save your money but the more you save the more money you get from the Government... for free!
How it works:
- You can use a Lifetime ISA to buy your first home or save for later life.
- You must be 18 or over but under 40 to open a Lifetime ISA.
- You can put in up to £4,000 each year until you’re 50. You must make your first payment into your ISA before you’re 40.
- The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.
The smallest deposit available for first-time buyers is only 5% (so £10,000 if the place you’re looking at costs £200,000). If you both save well, you could move in before you know it.
Saving more than the minimum deposit will give you a head start and also mean saving on other costs such as solicitor fees, mortgages and more, and you’ll have a lower interest rate.
A ‘Loan to Value’, or LTV, isn’t the money put towards a deposit, it’s the amount you’ve loaned to buy a property compared to the full price of said property. So, if you spend a deposit of £20,000 for a house that is priced at £200,000 and therefore have a mortgage of £180,000, your LTV is 90%.
The lower your LTV, the lower your interest rate is likely to be because lenders view smaller loans as smaller risks. Rates are usually lowest when you pay a deposit of 40%, which leaves 60% LTV.
We have even more advice for first-time buyers and how to make it onto the property ladder, so call your local branch and our property experts will be happy to answer any queries you have.