Are you a first-time buyer and wondering where to start?
When looking to buy your first property, the first thing you need to ask yourself is what you can afford. Buying a property is a long-term financial commitment so you need to consider how much you can put down on a home as a deposit as this will affect the mortgage deal you’re eligible for. The larger the deposit, the better the interest rate. You could use money from an existing property, savings, money that family is willing to gift you – and you’ll need to look at your monthly income and outgoings to determine if you can afford the commitment.
How much you can borrow?
Every lender has different lending criteria and ways of calculating how much they are willing to lend you if you are eligible for mortgage. They will look at your income, your deposit, regular outgoings and your credit rating. If you are buying jointly with a partner or family member, they will look at these for both applicants.
You can purchase a property with a 5% deposit, but lenders typically require 10 to 20% of the purchase price, and the higher the deposit the better the interest rate you will be offered. You can also use Help to Buy or the First Home Fund on first properties such as those offered by Urban Union. This means that you will receive government help with your deposit by way of an interest free loan.
Working out what you can afford
Start with your annual income before taxes along with your deposit amount. You can use a mortgage calculator to work out the mortgage you will be offered and what your monthly repayments will be. You’ll choose between a variable rate mortgage or a fixed-rate for 2, 3 or 5 years although you can also take out a 10-year fixed rate mortgage deal.
Other expenses will need to be taken into account including Stamp duty (LBTT here in Scotland) although you may not need to pay this if you are buying a property below the threshold. You’ll also need to consider buildings insurance, moving costs, estate agents fees (if selling a property), solicitor fees and mortgage arrangement fees – but these will vary depending on what sort of property you are buying.
When buying a home from Urban Union the price listed is the price you pay, with no ‘offers over’ or competition from other buyers. You simply need to go through the process and pay a reservation fee, which is deducted from your purchase price. Talk to us to find out more about the process.
Lastly, when calculating what you can afford remember that the unexpected can happen so it’s a good idea not to push yourself to your spending limit.