Craig and Jess share their thoughts on the First Time Buyer market and share some hints and tips about getting on the property ladder.
Let’s meet Jess
I’m Jess Edwards. I’m a mortgage broker for CS Financial Group, and I’ve been with the firm for twelve months now. I’ve worked in financial services for over 15 years, with about 10 of those doing mortgages.
How has the mortgage market been over the last year?
In the last year the majority of my clients have been First Time Buyers. The market has been crazy – obviously because we had the stamp duty exemptions, but we were hit with the pandemic too. And yet we didn’t see any change in the housing market. Properties were still selling and people were still keen to get on the property ladder.
Estate agents just don’t have enough houses to accommodate all of the First Time Buyers that we are seeing at the moment, which means it’s a really competitive market.
Tip 1 – get close to the estate agents
Because housing stock is low, First Time Buyers need to keep their eyes on all the portals, but also speak to the agents and make them your friend. That way, if they’ve got a property going on that you will be ideal for, you’re the first person that they ring.
Use social media too, follow all the estate agents’ pages – some promote new properties on social media before they actually go on Rightmove. So just watching Rightmove might not be enough to get you a home.
Tip 2 – get an Agreement in Principle
Estate agents won’t take you seriously without knowing that you’ve actually spoken to somebody about a mortgage and that you’ve been pre-approved.
An Agreement in Principle is where you have approval for a mortgage in principle from a particular lender. You’ll have disclosed income details and outgoings, your deposit details and they’ll have checked your credit worthiness. Once they’ve done that, they will then give you an Agreement in Principle to confirm you’re approved for a certain amount, subject to normal underwriting and property checks.
A lot of estate agents want to see the Agreement in Principle (AIP) before they even let you view a house now. The reason is because of the demand for the properties and the lack of stock. So the agent wants to know that any potential buyer is serious and ready to buy.
Recently we had 16 people waiting to view one house. The agent needs to know the financial position of every one of those 16 people and whether they have a property to sell/
Tip 3 – make sure the agent knows you’re a First Time Buyers
You’re in a position of strength as a First Time Buyer. You’ve got no chain and no house to sell in the background. So you are in a great position. But getting an AIP puts you in an even better place.
The estate agent works on behalf of the vendors and gets paid once the house sells. Because of that, they always make sure that the people viewing are in the best position they possibly can be.
Tip 4 – stay under the Stamp Duty threshold
There have been a lot of changes in the past year with regards to stamp duty. There was no stamp duty for a certain time, and then limited to certain amounts from September.
It’s now gone back to normal pre-pandemic levels. As a First Time Buyer you are exempt from stamp duty up to a property value of £300,000. Obviously there are very few First Time Buyers that are looking to buy a home worth more than that.
Tip 5 – save hard for your deposit
Deposits also went through quite a lot of change during the pandemic. The government ran a scheme to bring more 95% mortgages back to the market, which means just having to put 5% of the property price. Now pretty much all lenders are offering 95% deals.
The more deposit you’ve got, the better rate you tend to get. If you’ve got just a 5% deposit you will be paying more in interest. The rates tend to go in 5% brackets – you will find cheaper rates on 90% mortgages, and cheaper again at 85%. So if you can, scrimp, save and involve your family, parents, grandparents – it will all make a difference.
You’re borrowing a large amount of money over potentially 25 or 30 years and the interest that you pay will add up to thousands of pounds. Having that extra deposit can save you a lot of interest over the term of the mortgage.
Tip 6 – explore longer mortgage terms
The norm is a 25 year term mortgage, but there are a few lenders offering anything up to 40 years. Obviously, that helps people whose priority is to minimise their monthly payments, especially First Time Buyers.
Buying a house and paying all the bills for the first time can be quite daunting. Some people prefer to take their mortgage over a longer term to have lower monthly payments.
You can always change the term in the future. For example if you go on a two year fixed rate deal or a five year fixed, when the deal ends, you can change the term at that point. You might have 38 years left but decide to pay more and bring it down to 35 years.
When you come to remortgage, it is so important to get advice for that mortgage, to check that the term still fits within your budget. Your circumstances can change a lot within a few years. Your income may have increased, your outgoings may have reduced. So it’s a good point to sit down with an advisor again and evaluate your circumstances. If you can reduce that term, it helps stop you from paying so much interest.
If your interest rate has improved and the monthly payments have come down, you might choose to increase them a little to the previous amount, and save a year or two off your term.
Tip 7 – get regular advice
A lot of the First Time Buyers we speak to are just starting their careers, and their income levels increase as they progress at work. So it’s important to sit down with a mortgage broker regularly to go through budgets, payments and mortgages every few years.
Go through things in detail because you can save yourself so much money with a better interest rate and a better deal in the marketplace. You’ll also pay less in interest over the long term.
Tip 8 – get advice from a Mortgage Broker
When you’re buying your first home, you have never been through this process before. Having somebody to advise you, help you and guide you through the whole process is a big advantage. We know the journey that you go on as a First Time Buyer and can help make it easier, faster and cheaper too.
We’re here to hold your hand, we even deal with estate agents, solicitors and lenders to keep things moving along until you pick up the keys to your very own home.
