26 September 2019

Buying a home will probably be the most significant purchase any of us make in our entire life, and if you’re a first-time buyer then the process can feel particularly daunting.

Before you can start down the road to owning your very first home, you’ll need to make sure that you’re fully prepared to buy, and here are some of the key things that you will need to consider:

Consider All Costs

When purchasing your first property, there are a range of different costs and fees that you have to consider before you can even decide if you’re ready to buy or not. These can include:

  • Solicitors Fees: You might have to pay fees directly to your solicitor for their part in the mortgage arrangement, usually between £500 and £1,500. This can also include the cost of the land registry fee and the mortgage lender’s own legal costs.
  • Stamp duty: Stamp duty is the tax you pay on transactions involving property and land and this can be as high as 12% of the agreed purchase price. But the good news is that it’s not payable for everyone. If you’re buying your first home, you won’t have to pay stamp duty for any properties costing up to £300,000 and for properties costing up to £500,000, you won’t pay any stamp duty on the first £300,000 of the property value (you will pay Stamp Duty on the remaining amount, up to £200,000).
    • Any home costing over £500,000 however will be applicable for the full rate of national stamp duty, irrespective of whether you are a first-time buyer or not.
  • Survey Fees: As your lender’s valuation only covers the value of the property, you’ll also need to pay for your own survey of your chosen new home. Depending on how detailed this survey is, the cost could be anywhere from a few hundred to over £1,000. The purpose of the survey is to highlight any potential issues you might face with your chosen new home, such as structural or planning problems.
  • Home Insurance: Most mortgage providers will require you to have buildings insurance as part of the mortgage agreement with them. It’s also very advisable to include contents insurance with your home insurance policy – for an extra level of protection. The cost of this insurance can of course vary depending on the level of cover you want, as well as the condition of your home, the area it’s located and the value of the contents within the home.

Before applying for a Mortgage, check your Credit Report

When you apply for your mortgage, all lenders will perform affordability checks to determine whether or not you will be able to make the necessary repayments - including a check of your credit report . It is very important that your credit report has no errors, as this can adversely affect your chance of securing a mortgage.

A high credit score can ensure that you get the best mortgage deals on the market at the time; whereas a poor or average one can damage your chances of even being approved for a mortgage, as lenders could see you as a high credit risk for their business. For more detailed information on the topic of credit scores and how to look after your own, you can read our blog on How to Improve your Credit Score.

How much are you eligible to Borrow?

You may have already found your ideal property; but whether or not you can even take out a mortgage to cover it is another matter, entirely dependent on your individual circumstances. Before completely setting you heart on a particular property, you should always obtain a Decision in Principle (DIP) from a mortgage provider, which will tell you exactly how much you’ll be able to borrow and over what period of time. Once you have that in place, the exciting part of looking for your new home can really begin!

Decide which type of Mortgage is best for you

There are dozens of different mortgages on the market, from a range of lenders. For example, there are fixed mortgages, which means the rate of interest associated with your loan is fixed for a set period of usually 2, 5 or 10 years, as well as tracker mortgages, that are typically tracked against the Bank of England’s base interest rate. The best way to decide which mortgage is right for you is to discuss your financial situation with a mortgage broker or a similar financial advice professional.

Home ownership is a huge step in everyone’s life, and any decision you make needs to consider the short and long-term factors of both your ideal property and your financial situation. Hopefully, this blog has helped to put you on the right course for finding your dream first home.

Representative 1,116% APR