Do you someone who wants to get on the property ladder?
Whilst first-time buyers have every reason to feel aggrieved with the difficulties of getting on the property ladder, which is much more difficult than it used to be before the onset of the banking crisis, some rays of light have appeared recently.
It is important not to get sucked in to the “mortgages are impossible to get” syndrome as the reality is somewhat different. Yes, it still isn’t easy and the deposit demanded in most cases is relatively high, but there are more lenders and products on offer, especially at higher loan-to-values (LTVs) than were available last year, and don’t forget, mortgage rates are still at historically low levels and are likely to remain so for several years.
First of all you need to prepare your documentation. Lenders like to see proof of where you live (min 3 years), your last 3 months’ payslips and last P60, your last 3 months’ bank statements and full details of any loans or credit cards you have.
If however you are Self-employed they will want 3 years’ Accounts. Unfortunately, what’s good for the taxman is bad for the lender, so have a word with your Accountant and ask them to review the Accounts and strip out the private element of many of the expenses shown and the “Use of Home” claim for operating a business from home, which may significantly increase your Net Profit and thus the amount you can borrow, without affecting affordability.
All lenders need to ensure they are lending money to someone who is likely to pay it back, so it may be worth checking your credit score with a company like Experian or Equifax and in this regard, simple things like paying all your credit cards on time and making sure you are on the voters’ roll at your current address will be a massive help.
Finally, we need to look the biggest problem in most people’s minds “The Deposit”. Most of you naturally assume that unless you have a massive deposit you will struggle to get a mortgage. Whilst it is true that most lenders look for at least 10%, there are now several special schemes for first-time buyers that only require 5%, for example Nationwide’s “Save to Buy” scheme asks you to pay in regular deposits for six months before applying for their 5% mortgage and they’ll give you a lump sum cashback reward of up to £1,000 once your mortgage has completed.
In my next blog (How to be a first-time buyer – Part 2) I will look at affordability issues,
types of mortgages and how to get the best deal.
David Jones is the Senior Partner and Founder of Morgan Jones & Company. Born in Liverpool and an Accountancy graduate of the University of Wolverhampton, David spent twenty years working for the Customs & Excise in London then Shrewsbury before starting his own business. David's depth of knowledge of the UK tax system and his ability to communicate this learning has seen Morgan Jones & Company grow into Shropshire's most respected Accountancy Practice.