Planning ahead will help you make progress towards your goals and show lenders that you are prepared, which could make it easier for you to get a mortgage.
Unless you've sorted out your home-buying fund, you will need to start saving, cut down on any borrowing and make sure your credit record is as good as possible.
Build up a solid savings balance:
Mortgage lenders now require a deposit, usually a minimum of 10% of the property price. The more money you can put in as a deposit, the better the mortgage deal you can get. This could mean a lower interest rate.
Reduce your debts:
Most lenders work out how much you can borrow based on your outgoings as well as your income, so it's worth looking at any existing credit agreements you have to see if these can be repaid before applying for the mortgage.
Improve your credit rating:
Your credit rating can have an effect on the mortgage rates available to you. If your rating isn't good, you should take steps now to improve it. Here are some ways you can do this:
Be on the electoral register.
Keep up to date with payments on loans and credit cards.
Check your credit rating with a credit rating agency such as Experian and Equifax to make sure it's accurate.
Remember, any missed or late payments will be reflected on your credit report and could stay there for years, so be sure to keep paying on time, even if it's just the minimum amount. Also make sure you cancel any unused store cards, credit cards and bank accounts.
What can you afford?
The checklist below is quick and easy way to help you work out how much you can afford to spend on your mortgage each month. Subtract your total spending from your total income and the amount left over might give you some idea of how much you could afford for your monthly mortgage payment.
- Total - What you earn each month
- Minus - What you spend on household commitments each month
- Minus - Your everyday spending each month
- Minus - Your occasional spending on things like holidays
Total available to spend on your mortgage each month
Extra costs when buying a home
Moving home is expensive and there are costs that we often forget but could have a real impact on your decisions. You can make things easier by budgeting for them.
Deposit
You'll need a deposit, usually a minimum of 10% of the property price. Generally the bigger the deposit you have, the better the mortgage deal you can get. This could mean a lower interest rate. So the sooner you can start saving the better. Get started by opening a separate savings account and setting up a monthly standing order.
Arrangement fees
Many lenders charge an up-front fee for setting up a mortgage.
Mortgage Product Fees
Most lenders have a selection of mortgages with a product fee on certain deals.
Mortgage valuation
Most lenders charge a fee for valuing the property you’re buying.
You should always look at the area around the home you want to buy to understand potential flood issues. For more information on flooding, check out: Check for flooding - GOV.UK (www.gov.uk). And for Scotland: Flood Maps | SEPA - Flood Maps | SEPA.
If your home is in an at-risk area, there are things you can do to limit the impact. For more information on protecting your property from flooding, visit:
- Protecting property from flooding - Met Office
- How Can I Flood Proof My Home? - HomeOwners Alliance (hoa.org.uk)
- For an idea of how much it might cost to improve your flood defences, please visit: Property Protection Advisor – National Flood Forum
Property Protection Advisor is a charity that creates bespoke reports following a quick 30 second survey.
Legal searches and fees
You'll need a solicitor or licensed conveyancer to take care of the legal details.
Higher Lending Charge
If you're borrowing a high percentage of the value of the property, the lender may charge a fee to take out insurance cover. This protects them in case you can't pay back your loan and they have to sell your house at a loss.
Stamp Duty Land Tax
This is a tax you pay when you buy a residential property such as a house or flat. You usually pay Stamp Duty Land Tax (SDLT) on increasing proportions of the property value at the time when your purchase takes place. SDLT applies only to properties over a certain value so check out the government website for details on the current rates and thresholds applicable.
Removal costs
You may be happy to hire a van and move things yourself. A removals firm will cost more but can make the whole process much less stressful.
Estate agent's fees
If you're also selling a house and decide to use an estate agent, they'll charge commission on the price your house sells for.
Buildings insurance
Don't forget buildings cover before you exchange contracts.
If your home has five bedrooms or less, our new Pick and Protect home insurance covers unlimited repair or rebuild costs.
