Advice for getting onto the property ladder


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Getting onto the property ladder usually involves a lot of budgeting and saving, but the payoff can be huge. Owning your own home is a great investment and allows you to gain your independence. And the good news is, there are many schemes and offers which can help you along the road to home-ownership. From deposit and mortgage tips, to hidden fees you should be aware of – read on for our advice.

Deposit

Are you maximising your deposit savings? If you already have a Help to Buy ISA you could use it to get a 25% bonus – an extra 25p for every £1 you save up to the value of £3,000. If you’re under forty, another option could be to open a Lifetime ISA which also gives you a 25% bonus, up to a maximum of £1,000 a year.

You might decide to have both types of ISA, but you’re only allowed to open one ISA account per financial year. ISA’s are for individuals so if you’re buying with a partner they can have their own ISA and you could pool your resources later.

If you’re planning on buying a new build home then you could be eligible for a Help to Buy equity loan of up to 20%, or 40% if buying in London. There will be no interest on the equity loan for five years and you will only need a minimum deposit of 5%.

Deposit saving tips

Other ways to reach your deposit saving goals sooner include:

  • Consider temporarily moving in with family rather than renting.
  • Taking in a lodger (if your tenancy allows).
  • Renting somewhere cheaper.
  • Setting up a direct debit into a savings account or ISA so that you treat saving as another bill.
  • Cutting unnecessary spending (e.g. café visits and takeaways).
  • Opting for a cheaper holiday or local holiday.
  • Selling your car and buying a cheaper model or car sharing instead.
  • Asking for a contribution towards your deposit from your parents or another family member.

Mortgage

Do you know how much you’ll be able to borrow? It might be more or less than you think. For a clear idea, you may want to book an appointment with a mortgage adviser. They are the experts when it comes to mortgages and can provide invaluable advice. They’ll look in detail at your financial situation and scour the market to find the best mortgage deals for you. This could save you a great deal of time and effort.

Typically mortgages last for 20 – 25 years but many first-time buyers prefer a 35-year term as it allows them to make smaller monthly payments. This does increase the amount of interest payable but overpayments can help reduce this.

Your mortgage adviser will be able to help you get a decision in principle from a mortgage provider. This is a certificate that you can show estate agents/vendors when you make an offer. Or if you’re buying a new build home, you could show this to your sales adviser to prove that you’re a serious buyer. Once you’ve had an offer accepted and are ready to proceed, your mortgage adviser will go through the whole application process with you.

Mortgage application tips

To boost your chances of being accepted for a mortgage, you can:

  • Pay off any debts.
  • Show that you’re responsible with money by making all of your payments on time.
  • Stay out of your overdraft.
  • Avoid applying for any other financial products in the six months before you apply.
  • Close any credit accounts you don’t use.
  • Check what information the credit reference agencies hold on you and get any errors corrected.
  • Apply for a notice of disassociation if you’ve been financially linked to someone else on your credit file.

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Fees and charges

Getting on the property ladder involves saving more than just your deposit as there are various fees and charges that you need to be aware of.  Some of the fees associated with your mortgage can be added to it – you would be charged interest on this – but others need to be paid upfront.

Legal fees will cost in the region of £500 – £1,500 and you’ll usually need to pay surveyor fees which vary depending on the type of survey you opt for. If the property you’re buying is below £300,000 you won’t have to pay Stamp Duty  in England. However, if it’s over this, you’ll pay Stamp Duty on the remaining value with the amount rising as the property value increases.

Mortgage providers insist on you having buildings insurance but it’s advisable that you also take out contents insurance to protect your possessions. If you’ll be using a removals company on moving in day, you’ll have to budget for this cost too.

Typical fees and charges

With a typical mortgage there are some costs and fees that you may have to pay. But it’s always best to speak to your mortgage adviser:

  • Arrangement fee (£0 – £2,500) is the fee for the mortgage product. Sometimes it’s called the completion fee and can usually be added to the total mortgage amount, although this will increase the amount you owe and your monthly repayments.
  • Booking fee (£0 – £200) is a charge you incur when applying for a mortgage. Some lenders will include this as part of the arrangement while others will only apply it for mortgages over a certain threshold.
  • CHAPS fee (£25 – £50) pays for your solicitor to transfer money to your mortgage provider.
  • Mortgage account fee (£100 – £300) is payable to the lender to set up your mortgage.
  • Mortgage broker fee (£0 – £500) will be paid to your mortgage broker, if you choose to hire one, for finding and negotiating the terms of your mortgage.
  • Valuation fee (£50 – £1,500) covers the valuation undertaken by the mortgage lender.

Despite all the sacrifices you may have to make as you save towards your first property, you’ll be so happy when you get your keys and can start turning your house into a home. Find your perfect home with David Wilson Homes today. 

This guide was produced in collaboration with L&C, the UK’s leading fee-free mortgage experts.