Unless you are fortunate enough to be a cash buyer, you will need a deposit to be able to buy a property. Generally, you need to save at least 5-20% of the cost of the home you want to buy. Therefore, if you want to buy a home for sale at £400,000, you will need to save £20,000 minimum (5%). The more you can save to put down as your deposit will result in better mortgage offers being on offer to you.
Aside from your monthly mortgage payments, there are a variety of other costs when buying a home. These include (but are not extensive to):
• Survey costs
• Solicitors fees
• Removal costs
• Buildings insurance
• Furnishing and decorating costs (upon moving in)
• Mortgage administration fees
• Stamp duty
Remember First time buyers will pay no Stamp Duty on the first £300,000 for properties worth upto £500,000!
If you are struggling to save a deposit, there are a number of government-backed home-buyer schemes to help you onto the property ladder.
Help to Buy – this scheme is available to first-time buyers and existing home owners who want to buy a ‘new build’ property. The purchase price must be no more than £600,000, and under this scheme, you can borrow 20% of the purchase price interest-free for the first 5 years as long as you have a 5% deposit as minimum. If you are buying a London property, you can borrow up to 40% of the purchase price. Click here to find out more
Shared Ownership – this scheme is where you buy a share of a home from the landlord, who is usually the council or a housing association, and then you pay a reduced rent on the share you do not own. You will need a mortgage to pay for your share, which can be between ¼ and 3/4s of the home’s full value. At a later stage you can choose to buy a bigger share in the property up to 100% of its value. Click here to visit their website
It is important to work out what you can afford, remember if you struggle to keep up the monthly repayments; the lender can repossess your home and sell it so that they can get their money back. Before a mortgage is granted, lenders will want to see proof of your income and if you have any debts, to check that you can afford the mortgage payments. if they don’t think you will be able to afford it, they might refuse to grant your mortgage.
You also need to work out how much money you can borrow for your mortgage. When you apply for a mortgage, the lender will cap the loan-to-income ratio at 4.5 times your income. They will also assess what level of monthly payments you can afford by doing an affordability assessment. As an estimate, if you earn £50,000 a year, you could potentially borrow up to £202,500, but remember the lender will also factor in your monthly bills and outgoings.
There are a variety of ways to apply for a mortgage; from a bank, building society, or use a mortgage broker to advise on different mortgages available on the market. At W J Meade, we have a special partnership with Robert Sterling Financial Services. Each of our offices has a dedicated mortgage advisor, always at hand to offer you the latest advice and able to find the perfect mortgage just for you. Click here to visit their website.
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If you are buying a house, it is likely you will buy the freehold, meaning you own the property and the land it sits within. If you are buying a flat, you will be buying leasehold, or buying into a share of the freehold. The biggest difference between freehold and leasehold is that with leasehold you will have to pay ground rent, services charges or other landlord charges. If you buy leasehold, you need to check how many years are left on the lease and the costs of the ground rent or service charges. If the lease is for less than 70 years, you could struggle obtaining a mortgage. You can ask the landlord to extend the lease at any time, but there will be a cost for doing this and that will depend on the property.
