5 tips if you’re stepping onto the property ladder in 2016
Is 2016 going to be the year you buy your first home?
The Money Advice Service have joined up with Rightmove to give you five things to consider.
Make your savings work harder
If you’ve been saving away for a deposit, it’s hopefully sitting in a savings account earning interest. Make sure you check the interest rate you are earning and move the money to a different account if there’s a better rate available.
A new account to look into – whether you’ve already got a savings account or not – is the Help to Buy ISA. You can make a &1,200 initial payment then save up to &200 a month and get a 25% bonus payment when you buy. There’s a limit of &12,000 that can be saved in one Help to Buy ISA and that would net you a &3,000 bonus, though it would take you 4 years to save that much.
There are other restrictions you can read about on the Money Advice Service website.
Check your credit rating
When you apply for a mortgage, the lenders will be looking at your credit history, so the more you can do to improve it the better.
It’s important to try to avoid applying for any new major borrowing such as credit cards or loans in the six months before making the application. If you can avoid it for longer that’s even better.
Don’t miss any payments on credit cards or other borrowings as these would negatively impact your score. You should also check your credit report is correct. Any errors or inconsistencies such as different addresses can damage your rating but are easy to correct.
Finally, make sure you are registered on the electoral roll as this helps prove your identity.
Work out what you can afford to buy
Saving for a deposit is one thing, but that’s not the only indicator used to see if you can afford to buy a home. You’ll generally only be able to borrow up to four and a half times your income. Lenders will also look at your monthly expenses and day-to-day spending.
They could reject you or limit how much they will lend you if they think you don’t manage your money well enough, and they’ll also “stress test” your ability to repay a mortgage if interest rates were to rise, or there is a big change planned for your life, such as having a baby.
See if schemes can help you
There are schemes such as Help to Buy and shared ownership designed to make it easier for first-time buyers and home movers to purchase a home.
They’re often a good option if you are struggling to get a deposit or can’t afford to buy a full property on your own.
You can read about these and other housing schemes on the Money Advice Service website.
Watch out for additional costs
Lastly, don’t forget there will be a raft of extra things you need to pay for. From solicitor fees and stamp duty to moving costs and decorating, it’s easy to get caught out. It is also a good idea to consider any ongoing expenses that will go up, for example, maintenance on a bigger property or moving up a Council Tax band.
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