by Mark Johnston
Over the last few years the rules in the mortgage industry have become extremely complex and convoluted and it has become quite difficult for homeowners to keep track of changes and the pace of change has been a daunting obstacle for any first time buyer to attempt to overcome. We hope first time buyers find this guide useful.
With the Bank of England maintaining low interest rates recently, the lowest interest rate for the last two years, and the support of the market place with Loan to Value mortgages back to between the 10 – 20 per cent value, it is apparent that there is a opportunity to motivate and provide incentives first time buyers to get into the housing market with earnest. Further developments at a local council level have been released in a recent publication which aim to help out even further.
The Local Lend a Hand program, aimed at helping first time buyers bridge the gap on their initial deposits, has been taken up by five local authorities, including Warrington, Blackpool, Newcastle under Lyme, Northumberland and East Lothian with a further ten waiting in the wings. Essentially this means that successful applicants would only have to stump up an initial 5 per cent Loan to Value.
But what does this all mean? Here are a few helpful hints, tips and some general guidance.
Step 1 – The first thing to do before looking for a house or applying for a loan / mortgage is to build up a reliable team to take on this journey with you. It is not cheap and having the right expertise on your side will dramatically reduce costs and ensure you have an effective and efficient approach. Include a mortgage specialist, real estate agent (chose wisely), home inspector and lawyer. Don’t forget to ask your friends and family for referrals and do your own research, no cowboys needed when your money is on the line.
Step 2 – Know your budget and what you can afford. Have a conversation with a financial adviser, found in any local trusted and capital rich bank or building society. Only you and your lender (mortgage provider) can properly determine what you can afford so don’t overstate anything as this may come back to haunt you.
Step 3 – Find out what mortgage offers out in the market are best for you depending on your financial situation, income and outgoings. Once you know what you can afford, narrow down the different mortgage deals down to a few and seek advice from friends or family on what would be best for you. For example, if you want to only pay a set amount every month, probably the fixed rate options are for you. But if you are able to vary your payments then a tracker (tracking Bank of England base rate) option may be better. These are the basics so research is important.
Step 4 – Find a house! But don’t skip out on all the suggested inspections. Where is the house, is it likely to get flooded in the first rains? Is it built on an old mine? What about the building – is it listed and renovation or extensions will be vetoed by the local council? What about safety, is the neighbourhood up and coming or safe and secure? Consider local schools and nightclubs. Again, best advice is to check with family, friends and your team. The more information you have the better your decisions will be.
Step 5 – Buy what you want but don’t over extend your budget. There are always hidden costs and you need to account for these to not leave you flat broke, don’t forget, buying a house has many more costs than just the actual house.
Simple steps that may help first time buyers become happy home owners.
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