Buying a house is the single biggest purchase we make in our lifetime and therefore it is important that we understand the process. I have been working with Nottingham Building Society on this post for first-time buyers and reflecting on what to know when buying a house.
There is more to buying a house than just looking at the design of a home. You should be asking questions about neighbours, any building works and known problems with the home that would be obvious or discovered through the searches. However, before you even get to that point you should understand how much to save towards your deposit and how to make that money go further.
What to Know When Buying a House
- When buying a home, you need to have at least a 5% deposit, but it’s usually best to have as big a deposit as possible, as a larger deposit could open up better interest rates. That is a huge chunk of money to save, especially for first time buyers who may be paying back student loans and are only at the start of a career. However, if you’re 18-39 there are products including a Lifetime ISA (LISA) that can help savers reach their goals quicker. Nottingham Building Society offers a LISA which works to help you save more and take advantage of the Government bonus scheme.The Lifetime ISA is intended for two distinct savings goals – saving to buy your first home, and/or saving for your retirement. The money needs to be in the account for a minimum of a year and therefore it is designed to help those who have long term saving goals. I will certainly encourage my teenagers to take advantage of a LISA when they’re old enough and start regular savings that then gives them free money! It makes sense to maximise a LISA because you can pay up to £4,000 per financial year (April 6 – April 5) into your account and the Government will pay a 25% * bonus on a monthly basis, on any funds deposited in the previous month.
When getting a mortgage there are several things that you can do to prepare for this financially:
- During the years you are saving for your deposit, you need to build up your credit rating in order to attract the best mortgages. You can understand more about credit scores by reading understanding your free credit score with Totally Money.
- “Affordability” is a non-negotiable bottom line for lenders under MMR (Mortgage Market Review) rules. Banks and building societies have different criteria for lending, but they all need to be satisfied that you are responsible with money and can afford your repayments on the mortgage. The Nottingham has a first time buyer guide which is full of useful tips to ensure that you know how to apply for a mortgage that meets your budget.
- Working with a mortgage broker is a good option as you get the chance to chat through and understand what deals are open to you considering your own circumstances, deposit etc. Great hack, if you save with The Nottingham and have held £500 in a savings account such as the Lifetime ISA for more than 12 months, you receive access to The Nottingham’s recommend Mortgage Brokers – Nottingham Mortgage Services, without paying their standard £249 fee. Nottingham Mortgage Services can search over 50 lenders and thousands of deals, to find you a mortgage to suit your needs. This is great as many banks and building societies will only compare their own mortgages. Find out more about the other Member Rewards which can help you plan for a more secure financial future.
- Further costs when buying a house include home removal companies, surveyors and conveyancers. These costs need to be planned and budgeted for. We had to pull out of buying a house because the searches revealed that the garage conversion and additional garage extension had not been done officially and had actually used some land that didn’t belong to the householder. We could have risked it, but for us, we were not comfortable with taking that risk. We then found our dream home and so it was meant to be! But it was stressful at the time! You can save costs by moving yourself if you have willing family and friends to help. Did you know that if you complain about neighbours then you are obliged to reveal that to potential house buyers when selling? Therefore when buying it is an important question to ask!
- Finally, research the area that you are buying in. Before you start viewing, consider whether you can commute to work easily. Does the property fit in with your lifestyle and are you near to schools that suit your needs? Or are there recreational facilities nearby like parks? Find out if there has been flooding in the area as this can make insurance premiums more expensive. If you are buying a new build check out how big the development will be.
Buying a home is a huge responsibility and you need to take time to financially prepare for this stage of your life and get all the help and advice available to you.
Remember, your home may be repossessed if you do not keep up repayments on your mortgage.
*£10 to open. The maximum you can save each year is £4000. The Government will pay a 25% bonus up to £1000 each tax year. You can withdraw money from a Lifetime ISA to buy your first home, or at age 60. Other withdrawals will usually mean a 25% Government charge, so you could get back less than you pay in. Full terms and conditions are available.
Nottingham Mortgage Services is a trading style of Nottingham Mortgage Services Limited an appointed representative of Intrinsic Mortgage Planning Limited which is authorised and regulated by the Financial Conduct Authority.
This is a sponsored post where all thoughts and opinions are my own.