Financing Your First Mortgage

All the signs indicate that 2015 will be another buoyant year in the property market. A stronger outlook for jobs and an increase in real earnings, continuing low interest rates and competitive mortgage deals all look set to boost first-time buyer activity in the coming months.

MAKE SURE YOUR FINANCES ARE LENDER-FRIENDLY
The Financial Conduct Authority introduced its Mortgage Market Review (MMR) measures in April 2014. Under the MMR, mortgage lenders are required to ask potential homebuyers detailed questions about their lifestyles and spending habits to ensure that they can continue to meet monthly repayments if interest rates rise.

Lenders will scrutinise your outgoings looking for reassurance that your spending is under control; they will need to see a track-record of good budgeting and evidence that you’re paying back any debts. They will ask about your future plans too, including how much you spend on holidays and entertainment. So it makes sense to look closely at your budget ahead of time and make sure your finances are in good shape. Think about cancelling regular payments you don’t use any more, such as memberships or subscriptions.

CASH TO GET YOU STARTED
You will need to provide a deposit, and having a larger deposit to put down can improve your chances of getting a better rate on your mortgage loan. At this point, parents & grandparents often step in to help, so it’s worth discussing your plans with your family. You’ll also need to have cash available for all the incidental costs such as structural surveys, legal and arrangement fees, moving costs and stamp duty.

From Autumn 2015, first-time buyers will be able to kick start their savings by putting up to £200 a month into a tax-free Help To Buy Individual Savings Account (ISA) as well as a £1,000 lump sum when opening an account. The Government will top up your contribution by 25% up to a maximum top-up of £3,000.

Your Help to Buy ISA can be used for properties up to £450,000 in London or £250,000 elsewhere.

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up the repayments on your mortgage. A fee may apply for mortgage advice and, if applicable, you must ask your adviser for details before making any decision relating to a new mortgage as the actual amount will depend on your personal circumstances, but the typical amount is 1% of the loan value (on a typical £100,000 mortgage, this would be £1,000).

 

SIMPLY MONEY NEWSLETTER – SUMMER 2015