Buying a property has long been seen as a rite of passage, a seminal moment in reaching adulthood as you leave behind the care-free days of renting. For the current generation, with house prices generally being 5 times income for first times buyers, it is more difficult than ever to get on the first rung of the property ladder.
So, what can you do to put yourself in the best possible position to be able to afford your first home? Here are some pieces of advice…
Make sure your credit score is good
This can be achieved by using credit in a responsible way. Credit is required in order to build up a score which mortgage companies can use in order to assess how responsible you have been in repaying your previous loans, as it will indicate any missed or late payments as well as those repaid on time. However it is important that you don’t shy away from credit. Mortgage companies like to see that you have a history - having no credit history can be just as bad as having a poor one!
Before you start looking at house it is a good idea to get an idea of the monthly mortgage payment you can afford. This can be done by taking into consideration how much income you currently bring in, minus your current outgoings plus additional outgoings once you own your own home. Don’t forget outgoings such as council tax, utilises and insurances (buildings and life).
Saving a deposit
Even with government schemes providing guarantees, mortgage companies will need a deposit of at least 5%. The bigger the deposit the better, as not only will this reduce the mortgage you have to take out but will also mean you get a better interest rate. These will both have a positive effect on the monthly payments. If you are finding it hard to save a deposit a lot of people look to family members. This could involve moving back in with your parents to enable you to save or they could gift you some money towards the deposit.
With any big financial decision you need to do your research and getting a mortgage is no exception. As well as helping and advising on all the above matters, we also bring expertise to the mortgage market. As independent financial advisers we are not tied to any one provider so our sole purpose is to find the mortgage that is right for you and your circumstances. As well as the mortgage, we will look at protection insurance (life, critical illness and income protection) as well as insuring your home with buildings and contents insurance. Don’t hesitate to get in touch if you would like more information!
Article by Ryan Thickett, Financial Adviser for Charles James Financial Planning Ltd which is authorised and regulated by the Financial Conduct Authority