First Time Buyers Tips & Advice

Buying a house is the best thing you'll ever do.
I've recently moved into my first house with Becky and I've put together some tips and advice for you first time buyers out there.

It's quite a lengthy process and there is a lot to take on board but despite the press coverage there are deals out there to take advantage of. We were able to purchase a property with just a 5% deposit.

I've put together 11 tips to help you out if you are a first time buyer, from getting a mortgage to fees for surveys to budgeting and choosing utilities. It all differs based on personal circumstance and location of course but I hope the advice helps!

1.  We got a 95% LTV mortgage from Nationwide.
Rising fuel bills and maintaining an active lifestyle is tough going on the wallet. You could live like a hobbit to save up a 10-25% deposit, and many do, but like us if you want to have a life then checking out Nationwide's Save to Buy scheme is a must.

Basically you save into the scheme for 6 months, paying a minimum of £50 a month (we paid a lot more). After 6 months you will be eligible for the Save to Buy mortgage which you can take out with just a 5% deposit.

AND not only that, when you take out the mortgage you will receive a cashback reward depending on the amount of deposit you had (this can be up to £1000, paid to you one month from completion - we used ours on home furnishings).

AND that's not it either, Nationwide as part of the deal will also cover any legal survey fees which is a massive bonus.

It's a great deal and the service we had from Nationwide from start to finish has been great. We also bank with them and would recommend them to anyone.

It's worth noting however that the APR isn't as competitive compared to taking out a mortgage with a bigger deposit. Mortgages work on what is called LTV or Loan to Value, this looks at the amount of credit secured against the value of your property. If you have a small deposit of 5% you have a greater LTV, as such you are classed as a greater risk by the lender and a higher APR is put on the product. The better the Loan To Value, the better the deal you'll get so it's worth considering if you're lucky to have the funds, rather than going for the most expensive property you can afford.
 

2. Work out your budgets.
Before visiting your lender, and even before viewing properties, it is worth working out your budgets. There are many loan calculators out there where you can get a rough calculation. Nationwide have a handy "how much can I borrow calculator" and also a mortgage repayment calculator.

If you're using a basic mortgage calculator I would work with an APR of 4% and over 25 and 30 years. That will give you a good rough indication of a monthly repayment.

You will then need to budget your monthly outgoings, I really struggled to find all this information online so here is what I would budget monthly just for the house, we pay a bit less but it's a good starting point:

Mortgage repayment
Life & building and contents insurance: £40
Council tax: £150
(will vary greatly on area - see your local council website for rates)
Water: £35
Electricity & gas: £100 (really worth shopping around on this - I'll explain more later on).
TV license: £32
Phone & Broadband: £40 (you could get this a bit cheaper but our deal includes Sky TV as well)
Groceries: £400 (again dependent on your lifestyle but don't forget toiletries and cleaning products)

After that you'll have your personal outgoings such as loans, running your car, magazine subscriptions, mobile phone etc.

Don't forget you may need to budget for a bed, furniture, washing machine, tumble dryer, microwave, kettle, toaster...make a list and start building it all up early bit by bit. We stored plates, glasses, mugs..you name it. Take advantage of sales too, we bought our bed in January from Bensons For Beds for an amazing price while making it clear we wouldn't be moving for a couple of months. They simply kept it in storage.

3. If you have outstanding credit get it sorted.
Lenders take your existing credit into consideration. This is a calculation known as DTI or Debt to Income. Lenders will use a percentage of your income to cover all your credit, so if you are fully loaded with credit cards and loans, the chances of you being able to take out a mortgage may be restricted as the calculation will show you won't be able to afford it.

Even if you don't have any outstanding credit on your credit cards, lenders will still take the potential amount you could spend into consideration so it is worth considering the credit limits and cancelling any old unused cards that may be knocking around.

We were fine as I only had a car loan and at the time we both had really small balances outstanding on credit cards from Christmas which were due to be paid off anyway. Our mortgage was based on these cards being paid off before the mortgage completion and we had to provide proof of that.

Don't lie, be open and honest about it with your lender. When I worked in finance the amount of lies people told was incredible. It will all show up on your credit file. It is well worth investing in a credit report as early as possible so you can sort any problems before seeing your lender. Experian offer this, just make sure you email to cancel within a month or they automatically set up a monthly direct debit service - bit underhand if you ask me but there you go.

4. Make a big list of properties, drive-by before you view.
Do your research. Investigate about the area and understand where you are buying. We bought locally and still spent days driving around. You'll be surprised how much of an impression a drive-by does no matter how nice the inside of a house may be. When you find the one you like, visit at night and during the day.

5. Watch out for the £125,000 limit on stamp tax duty.
This is an interesting one. If you purchase a property over £125,000 you pay stamp tax duty, this is on top of the price of the property and survey fees. This can add thousands to your budget on top of paying for the house. As such it can be a really good bargaining tool to get the sale under the £125,000 limit.

6. Costs of buying a house are expensive.
It's not just about the deposit. You will need to budget at least £5000 on top of your deposit to pay for conveyancing costs. We were lucky that Nationwide covered the majority of our legal fees as part of the Save to Buy scheme however we still had to pay for a number of surveys to be done. Some surveys are dependent on location while some surveys may not be known until the initial survey has been completed. By the way you don't pay anything to the estate agent, only the seller pays the commission.

7. Be prepared for your mortgage meeting with the bank.
It will normally take 3 1 hour sessions however you can put it into 2 sessions like we did, the second being a meaty 2 hour session. The first meeting is where everything is agreed in principle. This is where the amount and term is discussed, a potential product is decided and then a lot of time is spent running through existing finances and future budget etc.

The second session confirms on the previous session in more detail. The plan is explained in full, reams of documents are signed and insurances are discussed and agreed. After 3 hours you are done.

We had a great mortgage adviser, Amanda Jones, she helped us through everything but make sure you do your research before the meeting. As part of taking out a mortgage you will need to take out life insurance and your mortgage adviser will also sell buildings and contents. We ended up taking both through Nationwide (underwritten by Legal & General) but not before a bit of negotiation as we had found slightly cheaper online.

Keep in touch with your mortgage adviser throughout the process, advise of any delays and ask questions it really does help.

8. Shop around for deals.
When you move in, the first month will be with the existing provider of the previous owners but don't be complacent, you'll be put on a temporary tariff which can be expensive. Hardly any utilities companies provide easy facilities for first time buyers, it is all setup for existing users. Use the comparison websites and enter in what you know. Once you have the best utility companies on the comparison websites try going direct and see if you can get it cheaper. Also look out for deals such as Nectar points with British Gas.

I found that buying gas and electricity together on a set monthly direct debit was cheapest. We went with Ovo Energy, they were one of the cheapest based on our property and potential usage. Importantly for me they offered 3% interest on accounts in credit so you're making money during the quieter summer months. They have a great welcome pack and it was so easy to get everything set up. Would highly recommend them.

Definitely shop around for white goods. For white goods we used Boots Kitchen Appliances - it is run by the same people at Appliances Online but we found the prices to be cheaper than them! You also collect Boots points which can be used to buy toiletries and medicines. The service from them was fantastic, on time and fully fitted. Also watch out for deals, our washing machine came with 6 months worth of washing liquid! Huge money saver! Also check out efficiency ratings, try and get the best you can and use Which for reviews.

For TVs, again I would shop around. Personally I found Currys to be useless, they wouldn't price match. If anything they actually told me to go to Richer Sounds, the sales guy told me that not only was the price less at Richer Sounds but they had better models! Currys were useful in reminding me of an independent in town called Spatial Sound & Vision. The guy in there was brilliant and ended up being cheaper than both Currys and Richer Sounds. Don't forget independent stores!


9. It's a long process - don't get your hopes up.
"It's a short chain, you should be moved in within a couple of months". You won't. If you do you'll be lucky. Something always crops up which is nothing to do with you. As a first time buyer you'll be a sellers dream but you are at the top of the chain waiting on other people. The chain will get longer and people will delay. Be patient and importantly phone your conveyancer regularly.

Conveyancers (the legal people who will sort out surveys and be your go-between between estate agent and seller) can be slow working but when it is in your ballpark they want it doing yesterday. They all work on paper and fax which can be annoying especially in 2013. Keep phoning, ask questions and put some pressure on. I always followed up with an email to keep a paper trail and for important matters sent a letter too.

10. Be prepared for the move.
Use the time waiting for exchange day to sort out your utilities. Once a move date is confirmed get in touch with the water, gas & electric and phone and broadband companies. Let them know the date and they'll get everything prepared in advance. It takes a month to setup gas & electric and the broadband line. Phone (and TV connection if you're getting Sky) takes a week.

If you're buying a bed and kitchen appliances get in touch with them and let them know the exchange date. If you give them enough notice they can arrange delivery on the same weekend as you are moving in. We timed it perfectly so the bed was delivered two hours after we moved in, white goods were delivered Saturday morning and Sky was setup on Sunday morning. We were fully up and running, together with furniture bought and built from Ikea by Monday morning.

11. Moving in day.
You will be given a potential exchange date. This date has to be agreed by all parties in the chain which is a challenge but don't worry your conveyancer will help you with this. A date is fully confirmed when contracts are exchanged. The move isn't legally binding until contracts are exchanged. Be careful as the deal could still fall through even after months of surveys, get the contracts exchanged as soon as possible.

You'll normally have between 1-2 weeks once contracts are exchanged. At this point the conveyancer should have been paid in full. On the day you will be given a time when the exchanged should be completed. This is when everything has been signed off by the conveyancers and the money from the bank has been exchanged. If you are prepared, and have kept in touch with your mortgage adviser it will all be ok.

Normally you would expect to pick up the keys at midday. This is strange process. After the months and years of build up, you walk to the estate agent, they take your name, take the keys out of the drawer and say "thanks, all the best". It takes one minute. It is bizarre but an amazing feeling!

Make sure you take a electricity and gas reading. You'll need to let your new (or existing if you are staying put) know. Don't worry you don't have to do it straight away. Over the period of the next couple of weeks get in touch with the council and TV licensing.

I hope all this helps, it sounds like a lot but it's just about planning, being ahead of the game and doing the maths. A lot of people say how stressful and hard it is moving house, to be honest I found it to be pretty straightforward. The frustrating part for me was predicting budget so I hope you find my sums useful.

Relax, plan well and enjoy. It's the best thing you'll ever do.

7 comments:

Adan Bert said...

First of all congratulations for your move and with your experience this article is very informative and useful. Moving and buying a new home is very long and stressful process and I found these tips very helpful for the same.

Kelly's Self Storage said...

Brilliant tips! It can be so stressful moving house so the more information you can get the better. And even when you have sorted out your mortgage you still have the stress of moving. Self storage can really help with the move, especially if there is a gap between you moving from one property to another.

White Van Gentlemen said...

Really in-depth advice. It is really good to hear your personal views and experiences of moving house. Like your other commenters have said, moving can really be a stressful process. The more you can do to plan ahead the better, there are a lot of people who can help you, from friends and family to removals companies.

Storage in Vancouver, WA said...

Fantastic post, very informative. I’m wondering why the other experts of this sector do not understand this. You must proceed your writing. I am confident, you’ve a huge readers’ base already!

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Mortgage Calculator said...

This is a perfect article.. Before buying any property, guidance is very important. Thanks for these tips and advice.

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