They really should teach this stuff at school. Where do you start when it comes to mortgages and becoming first time buyers? It can be an incredibly long, gruelling and stressful process and let’s be honest – who wants that? This guide will hopefully provide some reassurance and make it all easier to understand (I hope)!
This post is going to be LONG, so you might want to grab a drink and maybe a little sweet treat to keep you going! The aim of this post is to provide you all with as much information as possible!
Now, before I go any further. I would like to point out that everyones situations are different. Kayne and I were incredibly lucky and our situation was pretty good. We were both living at our parents, Kayne was putting away at least 80% of his wages and I was putting away 50% of mine. I appreciate that in other parts of the UK, house prices can be ridiculous but there are always ways around things. I would also like to add that I’m not claiming to be the oracle of mortgages, it’s an incredibly big decision and can be super stressful, so I’d like to help where I can!
So, we saved over roughly 6 months. Once we returned from Florida in July 2016, we did some serious saving and we were in our first home by January 2017!
I don’t really like sharing publicly our house information but I’m going to for the sake of this post.
So, our house was up for £132,500 and we got it for £128,500. The owners we think, were after a quick sale. It was up considerably cheap – bearing in mind how much other houses on our road have gone for, the majority ranging from 140-170k. It’s a three bed, semi-detached, driveway, garage, conservatory, summer house and a huge garden. We’re planning on being here long term, so we wanted something we could imagine having children in (however many years away that may be) and this ticked all the boxes for us. It’s a lovely area, the road is so quiet, it’s close to the beach and amenities, it’s within the catchment area for a wonderful school. We couldn’t have been any luckier.
One really good thing about the whole process – whilst you’re going through the steps to buying your home, you can continue saving so you don’t need the full deposit/fees before you start to look for a property. Our process was roughly 10 weeks so we had just short of 3 months extra to save!
Where do you begin?
There’s lots of different options and I recommend setting up a meeting with a financial/mortgage advisor. We did all of ours through Halifax and I can’t recommend them enough. They were incredibly helpful, always willing to answer our questions and always gave us 1.5-2hour meetings which was really beneficial. Nothing was ever a problem either.
I’m pretty sure most Estate Agents also have their own financial teams who can offer you advice – I know ours did. They offered to give us a meeting and go through all the brokers in the UK to help us find the best option but we were pretty content with what Halifax offered us. If you are currently doing a PGCE – there are companies specifically designed for newly qualified teachers – as you need to have proof of wage slips when you go through the mortgage process.
- Have a rough price in your head on what you’re willing to spend on a house. Remember, this is your first home. You don’t need to have a private gym, a swimming pool, games room and 20 en suites. Sure, they’re nice but be realistic.
- How much can you realistically afford to put away every month? What other commitments do you have? Do you need that 5* all inclusive holiday? Probably not. Do you need the latest palette launch? It can wait (which pains me to type that). Unfortunately, saving for a house is not easy and you have to give yourself tough love. Trust me, it will all be worth it.
- Figure out roughly what you’ll be spending a month on all your bills combined. For example, we worked it out that my pay just about covers all the bills (gas, electric, mortgage, insurances, council tax etc). So we have Kayne’s wages to do whatever we want with – food shopping, wedding/holiday saving and my ol’ favourite saying ‘treat yo self’.
- There’s tonnes of mortgage calculators out there that can give you a basic idea of what to expect. Please note that these are VERY basic and probably will differ to what your mortgage advisor will actually be able to offer.
- I would advise on getting a credit card, just to show that you can keep up with repayments but only put very minor things on there – e.g. a £20.00 top up food shop or cinema tickets. We literally used our credit card for petrol and that was it. Halifax did take into consideration our phone bills & Kayne’s car (which is on finance) when they did our credit checks.
What are your options?
There’s tonnes of options out there but the most common ones for first time buyers are:
- Help to Buy ISA
So, the help to buy scheme is a lifesaver. Basically, the idea of them:
Upon initially opening your account, you can put in anything from £1.00 to £1,000. Kayne put £1,000 in when he opened his. Afterwards, you put a maximum of £200 ONLY every month. Once you’ve reached the account balance of £1,400 then the 25% bonus is activated. So for every £200 you save, the Government will add £50. It doesn’t seem like much at first but it does add up eventually – they contributed £600 to our deposit. Which then meant we used the extra money towards solicitor fees and house bits. You HAVE to be a first time buyer and have a NI number to qualify. The maximum bonus you can be awarded is £3,000.
Once you are going through the house buying process, you must let your solicitor know that you have a Help to Buy ISA so that they can arrange for the Government bonus to be processed etc. You don’t receive this money, it goes straight from the Government to the solicitors off your deposit. If there’s two of you saving – you can BOTH have a Help to Buy ISA which means you can both be awarded with a separate government bonus.
- Help to Buy Shared Ownership
Now, this is a slight grey area for me as we didn’t do it through the Shared Ownership scheme and I don’t fully understand it myself. In basic terms: you buy the shares of said property – anything between 25% and 75% and pay low rent on the remaining value/balance (so like mortgage repayments). The beauty of the shared ownership – you have 100% rights as if you owned the property. The only time there would be an issue is if you wanted to knock down walls and change it structurally, inside and out. Which would happen ANYWAY due to building restrictions, property boundaries, planning permissions etc. If you want more information, check it out in the link below!
- Equity Loans
Please, forgive me if I totally balls this up. We steered well clear from the equity loan option for the simple fact that we didn’t want a new build property. This option seems to be purely for the new builds. So if you’re going for a new build, then this is probably your best bet. That or the Help to buy ISA. It can take a long time to build a property which gives you more time to save. Anyway, the basic idea of the equity loans is that the government will lend you 20% (which has to be paid back with your repayment over a set amount of years, I believe it’s usually 5) and you only need a 5% deposit. I’m not 100% sure if that 20% has interest added onto it so please do research this thoroughly before committing yourself to this option!
You can check out the Government Help to Buy website here!
I’d also like to add that you can have other savings accounts whilst also having a Help to Buy ISA so if you can afford to put away more than £200 a month like Kayne could, then definitely do it!
What deposit do I need?
This is where it can be a bit vague. Halifax are willing to accept a 5% deposit, like they did for us. Some banks/companies will only accept a minimum of 10% and some even 20% which is where things can get incredibly difficult. So, I would always recommend trying Halifax if you’re a first time buyer. This meant that with our 5% deposit and solicitor fees – we saved 1ok roughly (give or take a few hundred). This is where you need to take house prices into account too because the more expensive the house, realistically, the more deposit you need.
What should I look for when viewing a property?
- Be mindful of the interiors. Try to imagine it as a blank canvas. The place will look totally different with a lick of paint and change in decor. Our rooms look incredibly different since moving in.
- Usually, if the property is currently owned by older people, you should in theory be able to get it for cheaper because of the nature of work/modernising you’ll need to do.
- The area. What we did with the houses we liked, at various times of the day, we would drive up and down the street and get a feel of the neighbours and business of the road. It sounds really creepy and probably did look creepy to alot of people. But when you visit a house at say 11.00am on a Tuesday morning, it could be hella different during a school rush, morning commutes, weekends etc.
- Look at the window panes, the door frames, the walls. Look for things like damp and mould. You’re paying a lot of money for this place, you want it to be worth while!
- Once you’ve been taken round by the estate agent or current home owner, ask to look around again on your own.
- Can you honestly imagine yourself living there?
- Don’t take the photos you see online for gospel. Ironically enough, Kayne HATED this place when he saw the photos online but fell in love with it when he saw it in person.
- You should get told about insulation, boilers etc. If you don’t get told – prompt whoever is showing you around. You need as much information as possible.
- You can have second viewings on one property – I think we looked around our place 2-3 times before putting an offer in.
How does the mortgage application process work?
- Once you’ve set up a meeting with an advisor, you need to provide them with information. They’ll want stuff like pay slips, proof of address, NI number, ID. Make sure you’ve got these to hand.
- They will also do credit checks on both you and your partner (if there’s two of you going in for it). The credit checks are marked into categories and we thankfully got the best one. Don’t worry if you’ve very recently been a student or are a student – they don’t take your overdraft into account BECAUSE it’s 0% interest and of course – a student account. My overdraft/student account didn’t affect our credit score at all.
- Once they’ve gone through your income, repayments, any loans you may have etc. If the bank/company are happy – they’ll offer you an agreement in principle. Also known as a mortgage promise. Please note, these are NOT mortgage offers. This basically says how much they’re willing to lend you for a mortgage as it’s all dependent on the property you go for. Halifax were willing to lend us £185,599 so we had a lot to play with. That amount in my local area would get you in a fantastic area, detached house and probably 4 beds which is ace. So please bear that in mind to your local area as it will probably be different! We of course, didn’t need the full sum as we got our place for a fantastic price as I said further above.
- It’s worth noting that there are different types of repayment lengths, the longest I think is 40 years. But your mortgage advisor will go through all of that with you.
- There’s also fixed interest rates and variable interest rates. The most common mortgage option is fixed term repayment of XYZ% for three years and then onto the variable rate.
The mortgage offer and next steps…
- Next up is the mortgage offer. This happens once the lender (Halifax for us) has valuated the property and are happy to loan you the money for your mortgage.
- There IS a fee for valuations, ours was £495 and it was an upfront payment. So when you’ve found a house you love and the offer has been accepted by the current home owners, get in touch with your chosen lenders straight away to arrange a valuation.
- The valuation can roughly take anywhere from 4 working days to 2 weeks to come through. Once the valuation is back and the lenders happy with the outcome. Then you will formally receive your mortgage offer! Obviously, there can be slight implications at times but should this happen, your advisor will basically do what they’re there for – advise!
- After this, there wasn’t much else for us to do apart from sign the necessary forms and agree to Halifax’s offer. It was just a case of a waiting game!
Your mortgage advisor and solicitor will do a lot of communication with each other. So it’s essential that you tell your advisor the name and company of your solicitor once you’ve sorted that.
Make sure you are definitely happy with the mortgage offer as well. You have to know you can make those repayments. This is why I 100% recommend Halifax – originally quoted £650-750 by another company on our repayments but they were able to offer us £496 a month which has definitely made a HUGE difference. Please don’t take my word for gospel though as this may not be the case for everyone!
The legal stuff…
So this is where things get even more costly! Solicitors now become part of the picture!
I really recommend looking around your local solicitor firms, ask your estate agents and lender what solicitor firms they recommend. Do a lot of research on this. Once you’ve got it down to a couple, phone them up and get quotes. Our solicitor fees were just short of 1k.
So what did that 1k include?
- Their basic professional fee.
- VAT, which if I remember rightly was 20%
- Land registry fees
- Stamp duty tax* not all properties need to pay this. If your property is under £125,000 then you don’t need to pay.
- ‘Other’ expenses.
The good thing about the solicitors is that they will do it all for you. You’ll probably only meet them a couple times to just go over forms and sign things. You’ll receive detailed reports about building developments, crime levels, nature reserves, local information – literally everything. They also provide an in depth report on the search of your home and the area – so it searches for contaminated land etc. Which of course, is all extremely helpful to know.
It’s worth noting too that your solicitor will take all the payment – including the deposit. They will however, send you their bank details when it’s time to exchange contracts. They’ll more than likely sort out the handing over of the keys too with the estate agents. Ours did!
The final steps…
- Depending on the property chain will, of course, depend on the length of time it takes for you to get into your new place! For us, there was literally just us and then the old owners moving into an already empty property (what the estate agents told us). BUT for some, there can be a chain of 4-5 groups of people!
- That’s why as first time buyers, you’re in an ideal situation. Estate agents, companies, solicitors will love you because you’re dead easy and straight forward.
- Try get your moving date at the START of the month. We moved in on the 10th and had to pay a month and a half – so we paid £893 as opposed to our agreed payment of £496.
Once the solicitor has been paid and a date has been set. You’ll probably wee with excitement!
- Don’t worry about having fancy interiors, it’s your first home. You will get that Pinterest worthy bedroom I promise you but be sensible for the first few months. You don’t know what your bills are going to be like to begin with. We’ve been in our place since January and there’s still the odd payment that throws us off course!
- Everything takes time.
- This is a super, super random tip but: Make sure you have a bed and clean, made up bedding ready for your first night! We were so thankful to get into our brand new bed with freshly cleaned bedding after a long and gruelling day of moving in. I felt like I was sleeping in a marshmallow and it was sheer bliss!
Honestly, I cannot believe I’ve typed all of that. I really, really hope that this post has proved useful – even if it’s just to one person. It’ll mean the world to me, I know how stressful the process can be. We could never find anything that explained stuff with ‘simple’ breakdowns and I hated that. I hope this post did that for one of you. If you do have any questions, please comment, tweet me or something! I’d be more than happy to help in any way that I can!
Please, please, please let me know in the comments if you enjoyed this post! I do hope you enjoyed reading it. I’m surprised at how much I enjoyed writing about all of this *teehee*. Be sure to check out my other social media pages & blog posts! Thanks again,