DISCLAIMER: This account is my personal experience and should not be taken as financial advice.
So you're living at home and everything is great. Then one day you start daydreaming about having your own space, what you'd like to do with it and the kind of furniture you'd like. How nice it would be nice to upcycle a bookcase. You want to be able to do things your way and not your parents' way. You know it's time to move out. Time to prepare for buying or renting a property. The former is what my girlfriend and chose to do.
Personally, this journey started back in 2019 when I opened the Help To Buy ISA that was being offered at the time. It's a savings account to which the government will contribute an additional 25% of the total when the account is closed. For every £200 you save per month you'll receive £50 from the UK government. This type of account is no longer available however there is a Lifetime ISA which works in a similar way however the account has to be open for at least a year. The limit on how much you can deposit each month is also greater (£2400 in the Help To Buy compared to £4000 in the Lifetime). I saved into this account each month alongside other savings.
Skip forward through a global pandemic and my girlfriend and I are ready to start property hunting. One question still loomed over us though: would we be accepted for a mortgage? We both had good credit scores, never missed any payments and stable incomes. We decided to go and see an independent mortgage advisor.
This was helpful. He also explained that most lenders are willing to offer about 4x your income. So if you're buying with someone you could borrow a larger sum of money towards a property. He was fairly confident we were in a good position to start looking and making offers.
Money Matters
For credit score advice, this is helpful. I also bought and read Money: A User’s Guide by Laura Whateley. It's great! These are both good resources for educating yourself on personal finance.
Now onto the fun stuff - viewings. To make sure we knew what we wanted we looked at several properties - both houses and flats. At some point, you will need to compromise something. For us, that was having a garden. A flat was the best option for us. Luckily we found what we were looking for fairly quickly and decided to put in an offer. We did this through our solicitor to ensure we were doing everything correctly.
THE OFFER WAS ACCEPTED!! One of the benefits of the Scottish housing market is the way gazumping works. This is when the seller accepts a higher offer from another buyer. It is much less common in Scotland compared to England due to most properties in Scotland being sold by solicitor estate agents. Under the guidelines of the Law Society of Scotland, solicitors are encouraged to stop gazumping from happening.
It was now time to see the mortgage advisor again. He laid out several options for us and explained how it all worked, the pros and cons of each mortgage available and, finally, what would be best for us.
Quick Summary of Mortgages
The amount of money you are able to borrow from the bank depends on the size of the deposit you can pay. That is the lump sum of cash you are able to put down on the property. Larger deposits will reduce monthly repayments and vice versa. The repayment each month includes the value you borrow from the lender and the interest on top.
The UK government recently introduced the Mortgage Guarantee Scheme which is open to 95% mortgages. This means, as a buyer, you will only need a 5% deposit.
Be aware when applying for a mortgage, some lenders will do a credit check. They're looking to see if you are able and can be trusted to pay the mortgage back. Lenders will often want to see 3 months or so of bank statements when you apply so it's worth getting these beforehand.
Lenders can see who you are paying money to so it might be worth considering if a lender would disapprove of what you are spending on.
Mortgage successfully applied for and accepted. You've done the hard part for now - picking somewhere you like and getting accepted for the mortgage. Most stuff from this point is the paperwork which is best to complete and send as promptly as possible.
We move on to the next step. It's now time for the solicitors of both parties to do their thing. They'll agree on a completion date which is when the keys are handed over. For us, this was longer than we anticipated due to the seller moving to a new build. This is something you could ask at viewings, "when do you plan to move out?". Depending on your own circumstances this may or may not suit you. As first-time buyers, and not being part of a chain, the trade-off for us was moving in quickly or raising some more funds for the deposit. We were happy to wait a bit longer to get into the property to allow us more for the deposit and, ultimately, more to spend once we were in.
Another Viewing Tip
Due to the Coronavirus pandemic and the rise of online estate agents, more and more seller's are performing their own viewings. The mortgage adviser we spoke to said that if we saw somewhere we really liked then we shouldn't be afraid to ask what price they were looking for.
After an (im)patient wait, we got the keys to the property. Now it's time to decorate and put our own touch on the place. Time to create our own home and living space. It's time for new beginnings.
Buying a house in 2021 as a first-time buyer has been a learning experience. We're now 'adulting' and doing stuff school never prepared you for. It's important to enjoy and trust the process as much as you'll enjoy the final destination.
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Josh