10 top tips to help get you on the property ladder

Buying your first home and getting on the property ladder is the definition of adulting. And it need not be stressful or problematic if you follow a few simple tips and get yourself in a position where getting the right mortgage is a breeze. Even if you’re self employed, on a low income or have a poor credit rating, there are things you can do that will make that first home an achievable dream.

1. Start saving now

With the average deposit for a first time buyer standing at £45,000 in the UK, that first home can seem totally out of reach - and that’s before you factor in all the additional costs involved in buying your first property.

Setting a monthly savings goal is the smarty way to start saving so take a long, hard look at your monthly budget.

Start thinking seriously about how you can cut back on your spending and use a savings calculator to work out how much you realistically need to save each month to achieve your goal.

The Help to Buy ISA has a good rate of interest and will add 25% to your savings up to a limit of £3,000. The Lifetime ISA is another smart option which adds 25% a year to your savings - so if you save the maximum £4,000 you’ll receive an extra £1,000 savings boost. Plus you can keep a LISA open to save towards bigger and better things, including your retirement.

2. Get a good credit rating

Since 2014, all buyers have been subject to affordability tests and credit rating checks. If you have a bad credit score or you simply want to make getting a mortgage offer easier, there are a number of strategies that can help you improve your credit rating:

• Keep any repayments up to date as missed and late payments can stay on your credit report for up to 6 years
• Try and pay down debts quickly to signify that you can manage debt responsibly
• Get on the electoral roll as this helps lenders check you are who you say you are and live where you say you live
• Build or repair your credit history either by taking out a credit card and responsibly managing the repayments via direct debit or successfully repaying a debt on a prepaid card
• Close unused credit cards, mobile contracts, direct debits and store cards by contacting the provider directly

Checking your credit report before you apply for a mortgage is a smart move so you can make it as healthy as possible. Being turned down will be a negative factor on your file and make it more difficult to apply in future.

3. Calculate what you can afford to borrow

Affordability is another critical part of the equation when it comes to getting a mortgage and you need to be realistic about all the costs involved in buying your first property. For example, Stamp Duty can cost thousands if you decide on a property over the first time buyer relief threshold and there are plenty of other fees and charges that can add up to a considerable sum.

Using The Mortgage Hut’s affordability calculator will give you an idea as to how much you can afford to spend on a property. In turn, that means you won’t have unrealistic expectations when it comes to finding your first home and getting a mortgage.

4. Check out government schemes

If saving for a deposit is a real struggle, there are a number of government schemes designed to help you get on the ladder. These include the Help to Buy Scheme and Shared Ownership.

• Help to Buy: the Equity Loan scheme applies to new builds and most major lenders offer a new build first time buyer mortgage. You’ll only require a 5% deposit topped up by a 20% loan from the Government. There’s no interest to pay for the first 5 years and we can help you find the best deal on a new build mortgage - just look for developments that are part of the Help to Buy scheme.
• Starter Homes scheme: this scheme is targeted at first time buyers aged 23-40 with an income of up to £80,000 or £90,000 in London. New build starter homes are available with a 20% discount, with the proviso that if the home is sold within a 15 year period, some or all of the discount will have to be repaid.
• Shared Ownership: this scheme offers you the chance to purchase a share in your property from 25% to 75% while you pay rent on the outstanding share. You then continue to buy into your home when you can afford it until you own it outright.
• Right to Buy: if you’ve been a council tenant for 3 years then you could be eligible for the Right to Buy scheme which lets you purchase your current property at a discounted price.

5. Research your house hunt

Location, location, location may be the first rule of house hunting, but there’s no point falling in love with a property that’s in a postcode you just can’t afford. Use a property portal to widen your search and work out what’s important to you. For example, if you pay a premium for a property in a certain area because of access to good schools, is that something worth paying for if you don’t have or plan to have children?

Narrow down your property requirements to things that are nice to have such as bars and cafes or parks and must-haves like an easier commute or lower council tax. Once you’ve targeted your property deal breakers, use online searches and local estate agents to your advantage. Communicate what you’re looking for clearly and effectively and, if you can, have a mortgage agreement in principle before you start property viewings in earnest.

6. Bank of Mum and Dad vs buying with a friend

There are a couple of other options that you may be in a position to consider if saving for that deposit really does seem an impossible task.

Using the Bank of Mum and Dad might seem like an option but it’s not without hassle. Mortgage lenders much prefer parents to make a financial gift as this doesn’t impact on the amount you can borrow in the same wat that a loan can. This might involve your parents remortgaging their own home and they’ll need to talk to a mortgage adviser about their options including a guarantor mortgage where they agree to cover your mortgage if you can’t afford to.

The other option could be buying with a friend or partner and looking for a joint mortgage. You’ll get on the property ladder much sooner and you won’t be alone - the number of first time buyers buying with another person has risen by over 75% in the last few years. There are obvious pros and cons to joint ownership and you’ll need to be totally upfront about your financial situation and your expectations of the arrangement. Whatever agreement you come to, make sure you get it in writing if one of you wants to sell or remortgage.

7. Be prepared to be realistic

Buying your first property can be a really exciting time but it’s crucial that you remain level-headed and realistic at every step of the process. That can mean compromising on location or simply being patient about the amount of time buying a property takes - it can be months between putting in an offer and finally having the keys in your hand.

You also need to look long term and be realistic about the ongoing costs of owning your property. Will you be able to afford repayments if the interest rate rises? Have you budgeted for utility bills and upkeep and maintenance on your property? Having a survey done can be an expense some first time buyers are tempted to skip, but getting a heads-up on potential issues can help you keep a clear head when making an offer.

8. Know your mortgage products

Doing your research doesn’t only apply to your house hunt. Knowing the different types of mortgages available means you’ll be informed and have a good idea as to what you’re looking for when you meet your mortgage broker for the first time. That gives them a head start when it comes to finding the products you want that meet your affordability status and credit rating.

Look for products available specifically for first time buyers such as a specialised new build mortgage that only requires a 5% deposit. Your monthly mortgage repayments will also depend on the type of mortgage you get so it makes sense to know the main products available:

• Fixed rate mortgages: your mortgage repayments will be set at a fixed rate for a certain period of time so shop around for the best deals. This type of mortgage is ideal when you want to keep a tight rein in your monthly budget as you’ll always know your monthly outgoings. Once the fixed rate period ends, you’re free to shop around for another fixed rate deal as your lender’s standard variable rate is unlikely to be competitive.
• Tracker mortgages: as the name suggests, this type of mortgage tracks the Bank of England base rate which can work to your advantage when rates are low. However, you need to be able to cover repayments if the base rate rises along with your repayments.
• Offset mortgages: if you have a healthy savings account, you can offset the interest your savings would earn against your mortgage. It’s worth checking whether it’s a better use of your money to simply use your savings to pay down your mortgage more quickly.

9. Get your documents together

Admin is always boring, but when it comes to nailing that first property purchase, it’s absolutely vital to be on top of all the documentation you’ll need. Before you even apply for a mortgage, make sure you have the following documents available:

• Utility bills for proof of address
• P60 from your employer and your last 3 payslips
• Proof of any benefits received
• Photo ID to prove your identity, such as a passport or driving licence
• Up to 6 months' worth of bank statements

If you’re self employed, you’ll also need to provide two to three years of accounts made up by a chartered accountant, tax return form SA302 and bank statements that support the information in your accounts and tax form. The more documentation you have, the better.

10. Talk to a mortgage adviser

When you’re ready to apply for a mortgage, make an appointment with a mortgage adviser. At The Mortgage Hut, we have access to a wide range of products including some that you won’t find on the high street, which means that we can find the right product for your financial situation even if you’re self employed or have a bad credit score.

At The Mortgage Hut, we’ll run a full health check on your finances and identify deals that are just right for you. Our highly qualified team will factor in all the costs for you and complete all paperwork so that your mortgage application is dealt with quickly and smoothly. And our award-winning service will make sure that you get the most suitable mortgage option whatever your circumstances so you’ll be in your first home as soon as possible.

If you’re a first time buyer who’s looking to get onto the property ladder fast and you want to speak to an expert for the right advice regarding your mortgage options, why not call The Mortgage Hut today on 02380 980304 or make an enquiry.