Mortgage Advice: Tips for New Home Owners

Buying a house can be an exciting time, but it can also be difficult depending on our circumstances. As such, those purchasing a property for the first time are keen to learn some tips to ensure they’re taking the right steps when it comes to purchasing their first property. While there is a lot to consider, having a better understanding of what options are available and how the industry works allow you to make the right decisions with this in mind we had a chat with the team at Dumfries Mortgage Advice who shared their top tips for new home owners.

Get Your Credit in Order

While we all have different financial circumstances, those looking to buy a property should ensure that the credit they currently have is being managed. While it may seem unfair, there can be a lot of assumption based on the way we manage our money, simply because this is all a lender can refer to when looking at a mortgage application.

Things to consider can be paying our current rent agreement on time, and ensuring all credit cards are being paid on time each month. It can also be useful to pay more than the minimum payment. The more we’re able to showcase we’re able to manage our finances in the right way, there more likely it is a mortgage application will be accepted.

What Kind of Mortgage Will Suit Your Needs Best?

Many new homeowners will already know that a mortgage is a vital part of the process, but they may not be aware of the different types of mortgage available. There is no mortgage type that is better than another, it’s simply a case of finding what works best.

Fixed-Rate Mortgage

A fixed-rate mortgage is often used by those keen to know what price they’re paying moving forward. While rates can increase, they can also decrease, which means those on a fixed rate mortgage would not be able to benefit from this.

Tracker Rate Mortgage

Much like a fixed-rate mortgage, a tracker mortgage works on a base level that is pre-arranged. This can often be based on the Bank of England base rate.

Variable Rate Mortgage

A variable rate mortgage means that the interest paid can depend on current rates and the type of mortgage you have. Some may find that they only make small payments initially, only to find the payments go up at a later date.

Repayment vs Interest Only

A repayment mortgage means that you’re paying off the interest, as well as some of the amount borrowed. An interest-only mortgage means that you’re only paying off the interest initially, although you will need to repay the amount borrowed back at the end of the term.

Make Use of Government Schemes

Those who are purchasing a home for the first time will still be learning the ropes, and if you’re not careful, you could miss some great incentives that are available.

Help-to-Buy

The amount you need for a deposit can vary, depending on the mortgage lender you’re going with. It generally falls around 5 percent of the property value, but some may require more.

Evidently, the saving of a deposit can be a hindrance, but the Help-to-Buy scheme allows you to make use of an interest-free loan that covers 20 percent of the mortgage. The remaining 75 percent is covered by the mortgage.

Those looking to purchase a property in London will still need a 5 percent deposit, but the interest-free loan available from the Government covers 40 percent of the property value. The reason for this can be attributed to the high cost of living in London.

Help-to-Buy ISA

Many people have already taken advantage of the benefits an ISA can offer when it comes to saving money, but you may not be aware that there is a Hep-to-Buy ISA available that helps people looking to purchase their first home.

The Help-to-Buy ISA was first introduced in December 2015, and for every £200 saved, the Government will add an additional £50. This will apply up to £12,000 of savings, giving first-time buyers an additional £3,000.

As this is an ISA, it does mean that you will not be able to make any more tax-free savings into another ISA account in the same tax year. However, the Help-to-Buy ISA can be used in conjunction with the Government schemes.

Lifetime ISA

If you’re a first-time buyer under the age of 40, then you can open a Lifetime ISA that can be used for a first-time property purchase or towards your retirement. Saves receive 25p for every £1.00 saved, and is paid annually by the Government directly into the account. From April 2018, the bonuses receive will be paid monthly.

The Lifetime ISA can be used as a deposit on a property up to the value of £450,000 within the UK, and you are able to transfer your Help-to-Buy ISA without losing any benefits. You should note that Lifetime ISAs can be a little more complicated, as they are offered as cash, or stocks and share, so it can be worthwhile speaking to the provider in case you have any questions or uncertainties about the ISA.

Make Sure You Shop Around

Now you have a better understanding of how mortgages work, as well as the schemes in place to help first-time buyers, you will be in a better position to choose a mortgage that works best for you. Just as with loans and credit cards, the amount you pay can depend on which provider you choose.

If you’re not sure where to start when it comes to searching available options, then why not make use of a comparison site. Not only will this allow you to add your requirements, but it will also give you a breakdown of the rates currently on offer.

There’s no easy way of purchasing your first property, but it can be a more streamlined operation if you’re fully aware of the options available to you.