Whether you are a first-time buyer or moving for any reason, needing a bigger property, down-sizing, moving nearer to work, or wanting to be closer to the countryside, the earlier you start organizing your finances the better position you will be in.
We always advise that our clients have a meeting with us before viewing any properties to ensure they know what they can, or can’t, afford. There is nothing worse than telling someone that they have set their sights too high, especially when they have already put in an offer on a house. We hate doing it, but then if we’re not honest at the outset then this could lead to financial trouble further down the line.
We would encourage anyone who is looking to purchase for the first time, or an existing mortgage holder looking to move house, to engage with us before any decisions or plans are made. Look at your outgoings on a worst-case scenario. Factor in that interest rates are likely to increase at some point (not guaranteed, but highly likely) as well as your household utilities and the general cost of living. Taking these into account, it’s always best to have money left over at the end of the month rather than scraping by to make ends meet.
For anyone thinking about getting a mortgage, moving, or re-mortgaging, please don’t forget these tips:
- Never go over your agreed overdraft facility if you have one. Even if you go over by a few pounds on a £100 agreed overdraft on a regular basis, lenders will be uncomfortable with this. It would be better to have a slightly higher agreed overdraft limit and stay within it, rather than go over it. It sounds mad but it’s all about managing your monthly finances and showing you are in control.
- Credit profile – all lenders will review your profile to ensure you are suitable to lend to. All over 18’s will have a credit profile. You must ensure that any credit you have is repaid on time and no late payments are registered against your account. This includes mobile telephone bills. These are the most common type of account where late payments often occur. Many will tell us it’s because they forgot, and “it was only £10 so it doesn’t matter”. It does matter, whatever the sum involved or if you were only a day late with payment. To avoid such issues set up Direct Debits for your phone bill and to make the minimum payment on your credit cards, you can always pay more on your credit card but at least the minimum payment required will be made. You can check your credit report here:
- Make sure your bank statements are kept in order. A lender will assess your overall account conduct, as your account paints a picture of your overall financial management. Be careful if you like the odd flutter, as again lenders will consider this habit as part of their assessment.
- If you are saving on a regular basis for your first home, then consider using a Lifetime ISA. That way you can gain the extra Government incentives available towards buying your first home, provided you keep to the specified limits.
If you want to learn more about how lenders assess your income and review your affordability, please get in touch. The earlier you start the review process, ideally before you start to consider your first or next house purchase, the better. As with most investments, of which buying a house is likely to be one of the biggest, planning ahead can help resolve many issues in the early stages and often prevent costly mistakes.
Call 01676 533658 or email Sandy on sandy@mortgage-consultancy.co.uk.
