Tips for first-time buyers in 2021

Make this the year you become a homeowner

If you’re aiming to buy your first home this year, there are a few challenges facing you:

  • The availability of high loan-to-value (LTV) mortgages is currently very low, meaning you may need a larger deposit than you might have previously
  • If like many people, you’ve been furloughed, you probably won’t be able to borrow as much as you could have when you were working normally
  • Mortgage providers’ affordability checks are going to be even more thorough than usual in this uncertain economic climate.

So, for the best chance of securing a mortgage and buying a home, here are some of our top tips for the year ahead.

1. Step up your saving

If you’ve saved a deposit of around 10% of the value of the property you want to buy, that would likely have been enough to secure a mortgage if you’d applied last year. There are still some mortgages available at 90% or even 95% LTV, but there are fewer than before. If you can save more – around 15% of the property value – you’ll have far more mortgages to choose from.

2. Plan for additional costs

Remember that it’s not just the deposit that your savings will need to cover. The other costs of buying a home (including surveys, conveyancing, mortgage arrangement fees, moving services, etc.) can add up to thousands of pounds. If you haven’t yet considered those costs, you might have less than you think for your deposit.

3. Spend wisely

Mortgage providers will want to thoroughly examine your outgoings before agreeing to lend to you, so you’ll want your financial affairs looking their best. Postpone large purchases, close unused accounts, pay off your credit card every month, and avoid taking out new lines of credit (e.g. a phone contract or car lease), until after your mortgage is approved.

4. Shop around

If you’ve saved up enough of a deposit, there are currently some great mortgage deals around thanks to low interest rates. But, spotting the best deal can be tricky, as it’s not just the advertised rate you need to take into account, you also need to consider any additional fees and hidden charges. Securing a fixed rate now could benefit you in the next few years if interest rates rise, but you should compare these to tracker mortgages to see which is best for you.

A mortgage broker can help you to make sense of the different options and find the right one for your specific circumstances.

5. Get an agreement in principle

A mortgage agreement in principle is a statement that lenders can provide to give you a guide for how much money they are likely to lend you. This will help you to narrow down your search for property to those in your price range and will help you prove to sellers and agents that you’re a serious buyer.

You can approach lenders directly for an agreement in principle or speak to your broker.

All Rights Reserved. Information contained in this article and on our website does not constitute advice and is provided for information purposes only. Recipients should not act upon it, but should seek professional advice relevant to their own situation.