YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTAGE.
The mortgage will be secured by a charge on the property of the customer.
Millennials have quite the reputation, we're the generation that wants everything without working for it, the social set which documents every day of our life on social media and last but not least, worships the avocado - so much so that it's the sole reason we are destined to a life of eternal renting. Yes, we've heard it all...
As first-time buyer mortgage specialists (who broker mortgages in Wirral, Southport and Liverpool) and Millennials ourselves, we know our stuff. We're here to tell you that all of that is a whole load of baloney, although we're sure you're not too shocked to hear that fruit has little effect on your ability to own your own home.
We've combined the powers of our amazing Mortgage Brokers to publish a First-Time Buyer Guide like no other, one filled with facts, tips and tricks.
Before we start our actual guide, let's do a little myth-busting so you can hit your older relatives with the cold, hard facts when they blame your lack of homeownership on your social life.
It has been proven that getting onto the property ladder now is a lot harder than it was for our parents! In fact, we're looking at paying 8 times our annual wage just to own a home - Eeeek!
House Prices to Average Wage: 4 x
House Prices to Average Wage: Just Under 4.5 x
House Prices to Average Wage: 6.5 x
House Prices to Average Wage: 8 x
So, a singleton wanting to buy a house in 2020 is looking at their house costing them double the amount it did for a couple in 1980. Welcome to the roaring 20s, ladies and gents...
Let's start where you're probably currently at if you're reading our guide - saving for a deposit. It's one of the hardest parts of owning your own home and can take years, 8 years is the average time it takes, in fact. In our experience, this is the point where you probably feel instant regret about spending your student loan on nights out and alcohol. We guess you're in your mid-twenties and the thought of being 30 before you own your own home feels a little deflating.
Stop right there! Hindsight is a wonderful thing and we'll be the first to say that we'd have ignored any advice to save the pennies up during our younger years. Don't feel the pressure of society's standards, they're forever changing anyway! Whether you own your own home at 25 or 40, it's an accomplishment either way. Plus there is a reason why Millennials are branded as "Generation Rent".
Raising a deposit especially when renting is super hard and takes an almost superhero level of commitment to achieve it. For many people, it simply isn't plausible to live at home for years whilst saving and so, they get in the groove of renting and simply, can't afford to continue saving for a deposit. Life gets in the way, as they say.
However, as Mortgage Brokers in Liverpool, Wirral and Southport, we find that many people are paying hundreds more to rent than they would in mortgage repayments, which seems counterproductive. Although, of course being a homeowner comes with more responsibility and outgoings.
For many years, the 10% deposit was seen as the Holy Grail, once you've got that 10%, you're ready to become a homeowner. WRONG! Well not always, but let's do a scenario so you see why we say this...
On average, Mortgage Lenders will lend you a maximum of four and a half times your annual income, so let's say you're on £30,000 a year. The house you want is £250,000 so you're looking at a deposit of £25,000. Easy, right? BUT if the Lender is only willing to lend you £135,000 (£30,000 x 4.5), you're going to have to find the other £115,000 somewhere else and that's where we end the fairytale of the 10% deposit.
Now with Covid-19, many Lenders are putting a minimum deposit of 15% but the same rule applies. So, that's why we suggest always starting your search with a Mortgage Broker to see exactly how much you could lend based on your own salary. Of course, you'll be saving for the deposit in the meantime, here are some of our top tips to help you:
You may have heard of a Help to Buy ISA? Well, they ended in November 2019 but have no fear, Lifetime ISAs are here! They work very similarly to the Help to Buy ISA and also offer a government bonus of 25% to your savings. Every year, you can put a maximum of £4,000 in and the government will add 25% to the savings up to a maximum of £1,000 a year.
Set up a standing order so your account can rack up the savings without you even realising!
Everybody likes to have a goal in life and it's even better when you make them happen. Of course, you should have an end figure in mind but by having monthly goals, it makes you actually feel like you're achieving something.
Check out the App Store or Play Store to look for a Savings app that will help you keep track of your savings! There are some great ones on there and others which can help you budget! All working towards achieving your savings goal.
Nobody said it was easy and if you're serious about saving for a house, you're going to have to cut out some of things that aren't essential. Some of the little luxuries from your daily coffees to lunches out, nights out on the town and designer purchases, have to go!
Be strict with your spending! Stop taking your card to work and start taking your lunch! Love the gym? Cut the membership, get out and about in the park and check YouTube for free workout videos! Stop visiting the local Barista every day and start taking your own coffee to work. Little savings can all add up! Owning a home is costly, so we guess by cutting out the luxuries, we're preparing you for the reality of being a homeowner!
Many people don't realise until it gets close to the time that the deposit isn't the only thing you should be saving for. Oh no, as if setting aside the 15% deposit isn't enough saving for the struggling Millennial, you also need to set money aside for things like Valuation Fees, Surveyor Fees, Legal Fees, Mortgage Broker Fees, Home Insurance and furniture costs!
This can equate to a few thousand pounds and it's very important to consider how you're funding this alongside the deposit.
Mortgage Lenders use your credit score to basically see how well you have managed your repayments on any debt that you have in the past and use this to predict how well you're going to manage it in the future. From their perspective, they're lending you hundreds of thousands of pounds and they want to make sure that they're going to get it back.
The higher the score, the lower risk you pose and the better chance you have of being accepted for a mortgage. If you have never had anything on credit, even if you're amazing with your money, this means nothing to a Lender and you're going to be in the same boat as those who haven't been so good with their credit repayments in the past! Unfair, we know!
Not only that but Lenders like to see a range of successful credit lending, proof that you can manage several repayments to debtors. This means that it is useful to have a few things on credit, whether that be paying for things on a credit card, car finance or your mobile phone contract, etc... but do not go overboard, don't max out your credit limit and always make sure that you make at least the minimum monthly repayments!
Although we don't like to blow our own trumpet, meeting a Mortgage Broker is probably the most important part of the home buying process and the first real step towards owning a home. It's when you get to grips with what home you can actually afford, allowing you to narrow down your search and really kickstart the process.
It's important to look at what lifestyle you want to lead when you own a home, things like going on holiday once a year and having meals out every month may be very important to you, so it's vital that this is factored into your affordability. It's all well and good to buy a home at the top of your budget, but if it means sitting in every weekend and holidaying in your back garden, that might not be what you want.
When you meet with a Mortgage Broker, they will look at the range of mortgage deals that would be available for you and advise you on which one is best for your circumstances. You get something called an Agreement in Principle, a document that basically outlines the maximum estimate figure that you could borrow and lasts for 90 days. For First-Time Buyers, this is a really great document to have because it shows that you're ready to buy and that's quite appealing to Vendors.
There are lots of words and phrases in the mortgage world, check out our Jargon Buster and get to grips!
Once you have your Agreement in Principle, it's time to search for your home. Using property portals such as Rightmove is a great way to scan the market and set up viewings, although, make sure you register your interest with an estate agent. Remember, estate agents know what's coming on the market before Rightmove does, if they think that your requirements match a property, they'll set up viewings for you before it's even live.
Set up viewings for a few different properties, ensure that you take notes during the viewing and ask the Viewing Clerk any questions you may have. Check out the local area and get a feel for the neighbourhood, many people do drivebys at different times to highlight potential issues such as traffic and noise levels.
When you have found a house that you are happy with, you can put an offer in. The property market is very competitive and if you think it's your dream home, chances are that so do the majority of the people viewing it! It can be frustrating but you're certainly not at a disadvantage for never owning a home!
It's a common myth that Vendors prefer to sell to other homeowners, in fact, first-time buyers are actually in a better situation because they don't have to wait for a property to be sold before they can actually buy. This is called a 'Chain', you may see properties advertised as 'No Onward Chain' and this basically means that it's ready to go, just like you!
Let's say that your offer gets accepted by the Vendor, it's at this point where we come back into the frame to complete the mortgage application.
In the meantime, you will need to hire a Solicitor to handle the legal aspects of purchasing a home. This part is called Conveyancing and can be done by any Solicitor or you can opt for a Conveyancer, a Solicitor that specialises in conveyancing matters. They will deal with matters such as Local Searches and transferring the legal ownership of the property from the Vendor to you.
The Mortgage Lender will require a survey on the property to assess whether it's worth the value stated and in good enough condition to lend against, although this is not a full survey by any means.
If you want a more thorough survey, you will have to hire your own Surveyor and choose from a range of potential surveys including the HomeBuyer Report and Building Survey, formally called the Structural Survey. Choosing these types of surveys will highlight any serious issues that may could be costly to fix and if so, you may be able to negotiate a lower price or if they are really bad, your Mortgage Lender may withdraw the mortgage offer.
For the purposes of this, let's say everything is good to go, you then contact your Mortgage Broker and instruct them to finalise with the application. You'll receive a mortgage offer and you can proceed to Exchange of Contracts.
Exchange of Contracts is when you pay the deposit for the property and sign a legally binding contract. Most Mortgage Lenders will have it written in their Terms and Conditions that Buildings Insurance needs to be in place on Exchange of Contracts as this is now when you are financially responsible for the property. You will have to liaise with the Vendor and agree on a date for completion, when they have to move out and you can move in! This is also the date when all the money will be transferred across to the Vendor via your Solicitor and you pick up the keys to your new home!