The process of buying new can be daunting, especially when organising your finances, so this week we teamed up with Evolve Financial solutions to answer your most frequently asked questions around the financial side of buying a home
1. How can I realistically save for a deposit?
Our top tip would be to open a Help to Buy ISA while you still can. If you open one before 30th November 2019, the government will apply a bonus to the savings you’ve made when you come to buy a new home (terms and conditions apply). You can save up to £200 a month for 5 years and receive a £3000 bonus. If you can't deposit £200 each month, you can deposit less and still work up to receiving your bonus. Find out more about saving with a Help to Buy ISA here.
If you miss the deadline or don't want to open a Help to Buy ISA account, we'd reccomend still opening a seprate savings account. You're less likely to spend money if it's not readily available in your current account, so opening an account and forgetting about it will make saving easier.
If you're worried about spending your savings before it even reaches your savings account, set up a standing order on payday for a designated amount to go into your savings account. This way, you'll forget about it and won't feel the need to spend your savings money.
2. How much deposit is required to reserve a New Build Home?
Now you know the best ways to save successfully, it's a good idea to work out roughly how much you're aiming to save each month.
If you are purchasing via the Help to Buy scheme you will need a minimum of 5% deposit (5% of the total value of the property) from your own sources. The deposit can be made up of your own savings or can be from a gift from family. In most cases if it is a family gift then both the mortgage lender and your solicitor will require a signed letter from the giftor. If your savings are held in a Help to Buy ISA you can still use the government bonus from this along with the Help to Buy loan.
If you are purchasing via Shared Ownership, some lenders will allow you to use just a 5% deposit whereas others will ask for 10%. In either situation, the more deposit you can put down the better a mortgage rate you will potentially get.
3. How do I find out if my credit score is good enough for a mortgage?
Most mortgage lenders will use the main 2 credit reference agencies, Experian and Equifax.
It is really important to know your credit score and you credit health and checking these prior to applying for a mortgage is invaluable as you can give your New Build Mortgage Advisor a clear picture of your finances.
You can generally look at your credit report for free on: Experian www.experian.co.uk Equifax www.equifax.co.uk Don’t worry if your credit score is not perfect, there may still be mortgage lenders who can help you and your New Build Mortgage Advisor will be able to help you with this.
For more information on credit scores and how you can improve yours, click here.
4. Can I still get a mortgage if I have bad credit?
In short, yes! (Terms and Conditions apply and every circumstance is assessed individually). The best thing to do is to give your New Build Mortgage Advisor a full and clear picture of your circumstances so that they can advise the best way forward and look at the relevant lenders for you.
5. What’s the financial process for a Help to Buy purchase?
Once you have found your chosen development and the plot you want to reserve, speaking to a Mortgage Advisor who specialises in New Build is a must and will take a huge amount of stress away for you. Space Homes can help with this, so speak to your sales consultant for help if you need it. Your Mortgage Advisor will ensure that you qualify for the government loan by using the Help to Buy matrix calculator based on your income, deposit, outgoings and the term of your mortgage. They will also arrange your approval in principle with a suitable lender.
Its important to note that not all mortgage lenders offer Help to Buy mortgages, so make sure you have a look at the different lenders and ensure your chosen one offers a Help to Buy mortgage.
6. What’s the financial process for a Shared Ownership purchase?
Before doing anything, confirm with Space Homes that your chosen property is available with Shared Ownership. Access the Help to Buy website and apply online under Low Cost Home Ownership. You will then be able to find out if you qualify for Shared Ownership and how much.
Your New Build Mortgage Advisor will be able to check the Shared Ownership matrix to ensure your income fits the rental payment along with any mortgage requirements and also arrange your approval in principle. Whilst going through the qualification process you may be surprised to learn that you can actually afford a larger share in the property (subject to deposit).
Not all mortgage lenders offer Shared Ownership mortgages so speaking to a New Build Mortgage Advisor who specialises in this area is a must!
7. What are the costs to expect when buying a new home?
Your mortgage advisor should go through these costs with you to ensure you are aware of what needs paying and when and also to establish that the purchase is affordable. A snapshot of these costs are:
Mortgage lender arrangement fees - These vary from £300 - £1500 from lender to lender and can be added to the mortgage or paid upfront. They are generally non refundable and there are some lenders who have zero fees. Your New Build Mortgage Advisor will be able to guide you on this one.
Initial deposit to your solicitor - this will generally be £250 and this is so that they can start all of the relevant searches involved in buying a house. The balance of your solicitor costs will be payable upon completion of your purchase.
Valuation fee - This is the mortgage valuation for the lender, some mortgage lenders offer this as free with the mortgage deal. If you have to pay for it a basic valuation would usually be in the region of £300 depending on the house price and for a new build property this would be more than sufficient.
Some Mortgage Advisors charge a fee for their service and this is easily avoided by using a New Build Specialist Mortgage Advisor who does not charge and will take all of the stress away from you.
For more information on the costs involved in purchasing a new home, click here.
In collaboration with Evolve Financial.