30 May 2019

Top Tips for First Time Buyers

Buying a home for the first time can seem like travelling through a world of new information, with an endless amount of decisions to make along the way.

To make things a little bit more straightforward, take a look at our top tips for buying your first home.

1. Setting a budget from the start

Alongside your deposit, there will be a number of upfront fees that you must factor in when buying your first home. These include everything from legal fees, removal costs and the electronic transfer fee. So, set a realistic budget from the start and keep a record of all the money you spend along the way. This way you won’t be faced with any nasty surprises when you’re nearly over the line.

2. Using Help to Buy Wales

Help to Buy Wales is a scheme that makes new-build homes more affordable to first time buyers (and previous homeowners for that matter) who might struggle to get on the property ladder otherwise.

You will need to save at least 5% of the deposit towards the property, while Welsh Government will help you with a shared equity loan for up to 20% of the house price. The remaining 75% is covered by a mortgage lender.

While first time buyers’ share of the deposit is far lower than the average amount expected outside of this scheme, there are additional costs to be aware of, such as a £1 administration fee every month from the start of the loan until it’s repaid.

After five years, the shared equity loan will also be subject to interest (collected from you by HtBW) of 1.75% per annum on the outstanding amount of the shared equity loan. Interest will increase by the annual percentage increase in RPI plus 1% from 1 April following the fifth anniversary of the drawdown of the shared equity loan and each 1 April after that.

3. Reading up on different types of mortgages

A mortgage is a huge commitment, so do your research before settling. For instance, you’ll firstly need to decide between a fixed-rate mortgage or variable mortgage - make sure you understand the difference before settling on one. There are plenty of good deals out there, so spend some time balancing up the options and before long you’ll find a mortgage that is right for you.

4. Review your existing debts before submitting a mortgage application

When you apply for a mortgage, the lender will run a credit check on you. If you have loans or debts to pay off at the same time as your mortgage, the lender might consider you a higher risk candidate. To ensure you have a solid credit rating, review your existing debts before you apply for a mortgage.

5. Having proof of income to hand

To apply for a mortgage your lender will need to see a selection of documents, which might include your last three months’ worth of payslips – or potentially up to two years if you’re self-employed – a P60 form and bank statements from the last six months, amongst others. The sooner you get these documents together the better, to keep the process moving as quickly as it can.

6. Be prepared to run through your monthly outgoings

As well as having the documents mentioned above to hand, you also need to be prepared to give a rundown of your monthly expenditure. Expect your lender to dissect your outgoings with a fine-tooth comb, assessing everything from existing commitments to clothes, food and socialising. This is one of the main factors affecting how much you can borrow and it’s important you’re realistic to avoid any difficulties in repayment.

7. Buy within your means

Buying a house may not only be the most rewarding purchase you’ll make in your lifetime, it will likely be the most expensive too. It’s important to be realistic form the outset, so do your research and understand the criteria mortgage lenders will be looking for before making an application that could be turned down, saving yourself disappointment in the long run. If you stick within your means, you can steadily pay off your mortgage.

8. Getting a survey on your new home

Perhaps one of the most crucial things to consider is a survey on the property. A full structural survey can cost upwards of £600 and, while this may seem an expensive additional cost at the outset, it could save you thousands down the line.

Make sure your surveyor is a member of a recognised governing body, such as the Residential Property Surveyors Association (RPSA) or Royal Institution of Chartered Surveyors (RICS).

9. Don’t forget about Land Transaction Tax

Land Transaction Tax replaced Stamp Duty from April 1, 2018. Land Transaction Tax is a land tax payable on every residential house purchase over £180,000. The price you pay will depend on the cost of the property, but most importantly you must pay this within 30 days of completing on the house.

While your solicitor will likely remind you to make this payment sooner rather than later, it is you as the homeowner who is legally responsible to pay the Land Transaction Tax within the 30-day timeframe. If you miss the deadline, you will face a fine, so set plenty of reminders to avoid this - at all costs!

Published: 30/05/2019