Buying your first home is a big deal. For a lot of us, it feels like the ultimate goal, the unticked box at the top of our bucket lists. We know that it can feel overwhelming, and perhaps at times unachievable. There’s a whole world of information out there about getting onto the property ladder, it can be easy to get lost among it all. That’s why we’ve done the homework for you, and put together this list of 5 essential things that any first-time buyer should know. So you can embark your home buying journey feeling confident and clued up.
1.) A Lifetime ISA makes saving for your deposit much quicker
Opening a Lifetise ISA (LISA) can be one of the savviest decisions to make if you’re trying to get ahead of the savings game. Anyone who is a first-time buyer between the ages of 18 and 40 is eligible to open a Lifetime ISA. It’s a type of savings account and you can save up to £4,000 each year into it. The best part? Whatever you put in, the government will top you up an extra 25% of your savings. This can hugely speed up the home buying process, giving you a much-needed helping hand with saving for the deposit.
Want to see how much quicker you could save your deposit if you use a LISA? Our Homefinder ‘how to buy a home’ tool will show you how many months you’ll shave off your deposit-saving timetable. It’s a brilliant way to start preparing for the costs of your new property and feel motivated.
2.) Low-deposit mortgages are disappearing due to COVID-19
At the beginning of 2020, there were hundreds of low-deposit deals that enabled first-time buyers to get a 5-10% deposit mortgage. Now, as a direct result of the pandemic, deals like this have been disappearing from the market. Because of this, if you’re looking to buy property over the next 6 or so months, you should expect to save for a 15-20% deposit. We would advise planning ahead as much as possible, and if you are willing to wait out the pandemic, it might be worth doing so for you to get the best deal possible.
3.) Get your finances into shape 6 months before you apply for a mortgage
It’s super important to try and get your finances in order at least 6 months before you are hoping to apply for a mortgage, so that you look as good as possible to mortgage lenders. This involves saving as much as you can for your deposit (have a look at one of our favourite hacks for saving tips here). Assessing your credit history will also be helpful here. Whether that involves paying off outstanding bills or debt, or having a look at your credit report and spending history. Making small changes over a period of 6-12 months could really improve your mortgage claim.
4.) Get ahead of the game with Stamp Duty Tax
Don’t get caught out by the Stamp Duty Tax. Stamp Duty is the tax that everyone has to pay each time they buy a property, regardless of whether you’re a first-time buyer or not. It is calculated based on the cost bracket of your property, so the more expensive your house or flat will be, the more you will have to pay. Many first-time buyers are unaware of the tax, or wrongly presume that it’s included within your deposit…it’s not!
The good news is that with the current Stamp Duty Holiday all taxes have been cut for any properties under £500k up until the 31st March 2021 – so now is a better time to buy than ever! If you’re planning on buying a property after the cut off date, our Homefinder tool with its built in Stamp Duty Tax calculator is a great way to plan in advance how much you will need to save. Or check out our article that explains how much tax first-time buyers normally have to pay.
5.) Use a mortgage broker
A mortgage broker is your direct route to finding the perfect mortgage deal for you. They specialise in tracking down lenders who understand your needs and situation, and they can also help you complete your mortgage application. Not only will they help you filter down your options and recommend the best range of lenders for you, they also have access to a greater range of good mortgage deals. If a wider variety of choice and advice from a specialist sounds good to you, then using a broker might be a great lifeline. We have partnered with Habito and Trussle, award-winning online mortgage brokers with great customer service. Speak to them about what you could get.
If this has got fired up to get on the property ladder, and you’d like some help to make it happen – we’ve got you covered. Our affordable Membership Plans create a personalised journey to home ownership for you. Guiding you step-by-step through the actions you need to take to buy your first home.