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First-time home buyer guide

Guide for Buying a Home as a First-time Buyer in the UK

Finding a property where you want to live, is quite a complicated task. There are various aspects of the process that you have to deal with so that they can go smoothly. A mortgage is probably the most sought-after way to buy a residential property. It makes things simpler and easier for both you and your lender. However, these things are not as simple as you might think. If it’s your first time dealing with this matter, there is some information that will be useful for you. You can find all of them in this first-time home buyer guide.

Who is considered to be a First-time Buyer UK?

For your purchase to be treated as your first-time buyer UK, you must have or had no other property. This applies in the case of properties all around the world and not just the UK. Moreover, it is only concerned with those that you had bought for residence. So, even if you own some other type of property, except the one that you live in, your purchase would be treated as the first-time buyer UK. 

Now, you might wonder if there’s anything exceptional about it. In that case, you must know that there are a lot of schemes that are meant to help you out. You won’t be available to avail of these in your second and subsequent times.

Sometimes, being a first-time buyer in the UK may not be helpful for you. For example, suppose the situation where you have inherited a property where you live. Then, you’d be its owner, and ineligible for the benefits of a first-time purchase. So, owners are not included in the schemes that we are going to see. They’ll have to look for other available options.

How does Mortgage Work?

When you want to buy a house, you probably won’t be paying the whole amount once. Just the opposite of that, you would want to pay the whole amount in instalments. That would be a better option without any doubt and put little strain on your pockets. By getting a mortgage at a suitable rate, you’ll be able to purchase, by paying instalments. This would come to effect only after you and the lender agrees with the stated terms. 

Are you looking for the best rates? Make sure that your credit file shows a convenient record. 

On what basis will a Lender Grant you a Mortgage?

You would be required to give them all the information they want. Generally, they can ask for all your financial details such as past debts, earnings and spendings, savings, etc. They would also surely check your credit file from a reference agency. In it, they’ll get all the information regarding how you’ve dealt with past debts. They would check whether you’ll be able to repay them.

How do you get the Best Rates?

To make it easier on your finances, you would surely want the monthly instalment to be as affordable as it can be. In a way, it can be said that’s in your hands and you can make that happen. For that, you need to understand how the lenders set the rates. Your credit record would probably be the most important thing they would consider. 

A lot depends on it, and in turn, it depends on you. You must maintain a good record all the time if you want to be able to get a mortgage at the rate you want. Otherwise, you’ll be charged a high one as the lender would see it as a big risk. In case, your credit rating is too bad, you’ll have to consider other options.

Another thing that affects the rates is the deposit you pay them. The higher it is, the lower the interest rate that you pay. So, you must try to keep this amount as big as possible. Save up money for this purpose if need be. Even if it takes time, it would be worth it. An individual savings account will allow you to save a good amount without any tax.

Lastly, you must examine a lot of options before choosing. You probably won’t find the one that you like so easily. You must always be careful while moving ahead with this. It would be better that you make a decision only after careful consideration.

You have to keep paying the same interest

When you buy a mortgage you have to agree on a rate for the agreement to be effective. However, that is not all there is to it. This matter is a little complex when you consider the fact that the rates can be charged in two ways – fixed and variable.

Which type should you choose to suit your situation?

Seeing that there are different types, you would want to know which one of them is the best. In that case, none of them could be singled out as being the best in all cases. It changes from one customer to the other. Though it is a fact that fixed rates are the most chosen by people for obvious reasons. You can go for it if you want the payment to remain the same.

Another type that you might like is a discount. In this, there is a variable interest and a fixed discount on it. So, no matter if it goes up or down, a specific amount will be deducted from the monthly instalment. Apart from the ones mentioned above, there’s the tracker as well. 

In this, your lender keeps up the rate according to the changes in the Bank of England. This is often done only at the start of the arrangement. In some cases, the lenders apply this to the whole period of the arrangement. As expected, very few people go with that.

Finally, you can also get it at a standard variable rate. This is fixed by all lenders according to what they want. It is not affected by a change in interest rates in other places. This is typically highly-priced of all types. If you choose this, you must do so only after careful consideration.

What are the other costs to consider?

The mortgage cost won’t be the only price that you need to go through vividly. There are some more of them, and that’s why you need to get an advisor and prepare a budget. Don’t leave out the cost of packing and moving all your assets into it.

In addition to that, you have to cover the expenses of surveying the land, as well. Apart from this, there’s also the building insurance and the price of furnishing your new house. You also need to make sure whether you have to pay stamp duty on your property. You might need some help in doing all these, and getting a financial adviser would be worth it.

What if you’re unable to avail of the costs?

It is often the case that a buyer is not able to bear the costs of their first purchase. First, lenders always check if you can repay them. Hence, it is clear that they won’t accept your application to borrow money. But, at least, you also won’t be stuck in a tight situation after stepping in it, unknowingly. 

Now, you might wonder what to do with your plan for your first home. Luckily, you can still hold on to it as there is still hope. All you have to do is get the help of someone in your family in paying the costs that you can’t afford. The arrangement would be between you and the lender. The person who helps would only act as a guarantor. 

There are some lenders, you’ll find, who lend out this kind of mortgage. Make sure that the person you entrusted with paying would be able to pay in case you can’t. Otherwise, you might get into trouble as this arrangement is legally binding. Other than this arrangement, some government schemes can help you. 

How do you compare two mortgages?

You would naturally want the best deal that you can get. For that purpose, you must be able to compare different offers as you’ll come across a lot of them. The most effective way to do that would be to consider the annual rates charged by each one of them. If you use the monthly ones, it can be inaccurate.

They may seem small but can add up to quite a big amount. Even though the regulations say that lenders should inform you of the annual cost, some of them might still tell you the monthly one. There is no reason to be confused in that case. Simply put the rates of each month together and calculate the annual rate. Now, there are some other expenses on the arrangement as well. You have to include them, too, to make your calculator accurate. This would be helpful to you in choosing one that has the least annual cost. However, it would be effective only if you stick with one lender.

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