Principality. Where home matters.
10 February 2017
Top tips for first time buyers
Buying a home for the first time can seem like travelling through world of new information with endless decisions to make on the way. Here, Principality Building Society’s Head of Product Management and Pricing, Naveed Mohamed, offers his top tips for buying your first home, making the process that little bit easier for you.
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 making new-build homes available to first time buyers (and previous homeowners for that matter) who might struggle to get on the property ladder otherwise. The first time buyer will need to save at least 5% of the deposit towards the property, while Welsh Government will give the buyer 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. Nonetheless, it’s there for the taking. Do your reading around Help-to-Buy Wales; it could get you on the ladder far quicker than you anticipated.
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 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’ payslips, or possibly up to two years if you’re self-employed, a P60 form and bank statements from the last six months, among 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 expenditures. 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’s very likely 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 is likely to 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 £600 upwards and while this seems 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 stamp duty
Stamp duty is a land tax payable on every house purchase over £125,000. 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 help you sort this payment out sooner rather than later, as the homeowner you’re legally responsible to pay the stamp duty. If you miss the deadline, you will face a fine so set plenty of reminders to avoid this at all costs!