BUYING a home is a daunting task for anyone but especially those who have never done it before.
As part of her job, Jane King, mortgage adviser at Ash-Ridge Private Finance, has spoken to hundreds of aspiring homeowners and she sees the same blunders over and over again.
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Here, Jane shares the common traps first-time buyers fall for that can easily be avoided.
1. Asking your bank for a mortgage
Many prospective buyers will head straight to their bank account provider when they realise they will need a mortgage, according to Jane.
She said: “One of the biggest mistakes first-time buyers make is going to their own bank for a mortgage because they assume they will be offered a preferential rate.
“That’s not the case and could mean borrowers who do this end up paying a higher rate than necessary.”
Loyalty is not rewarded and most banks do not offer better rates to existing current account customers.
Advisers from high street banks can also usually only advise on their own deals and will not be able to tell you about better offers elsewhere.
Jane added: “The best thing to do is find a good independent mortgage broker who can search the whole market and find the best deal for your specific needs.”
2. Failing to research help available
There are a huge number of initiatives to help first-time buyers get a foothold on the ladder.
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And it is worth aspiring buyers looking at whether one of these schemes could help them own their dream home.
Janes said: “Many people looking to buy a home are generally unaware of special first-time buyer or affordable home schemes.
“There are so many different ways to buy, so do some more research and check if any would help you get on the ladder.”
Shared ownership, the First Homes Scheme and Deposit Unlock are some of the government-backed ownership schemes.
Lenders also offer a number of products that can help buyers, including guarantor mortgages and joint borrower sole proprietor.
3. Getting swayed by the headline mortgage rate
The rate offered by a mortgage lender is just one aspect of the overall deal.
It’s important to look at other costs too.
Jane said: “Another mistake is buyers tend to look at the headline interest rate rather than factoring in all the fees and charges which could make the mortgage uncompetitive.
“Look for the overall cost rather than the headline rate.”
A good adviser will talk you through all the different features of a mortgage and show you the total cost.
4. Using advisers or solicitors recommended by estate agents
Many estate agents are partnered with mortgage brokers or solicitors and have a financial incentive to refer their customers on to these companies.
First-time buyers may even feel they have to use these firms.
But Jane said: “Some buyers tend to use the brokers or solicitors recommend, there is no obligation to do this and there may be extra costs involved, as well as a potential conflict of interest.”
5. Not checking your credit history
Mortgage lenders will look over your credit file and it usually forms a big part of your application.
But many would-be borrowers do not look up their file to see if everything is in order, according to Jane.
She said: “One of the main reasons a mortgage application gets declined is because of a borrower’s incorrect credit history.
“When some first-time buyers hear a no, they assume that’s it.
“But there could simply be an out-of-date address or mistake in the date of birth that has triggered the decline.
“These are easy to change and could then mean the mortgage goes through fine.”
6. No budget worked out
Ahead of applying for a mortgage, it’s a good idea to work out the level of repayments you can afford.
Jane said: “Many first-time buyers often over or underestimate their borrowing potential.
“Work out a budget on a spreadsheet with how much you can afford to repay in a month and go from there.”
7. Brushing over lease terms
First-time buyers are more likely to buy flats as they are often cheaper than houses.
However, it’s vital to look over the terms that you are committing to.
Jane said that all too often people do not read, or properly understand, their lease.
She added: “This means they can get hit with nasty surprises after they have bought in the form of charges or clauses that they are bound to.
“Always check the terms of the lease thoroughly, ensure you are aware of the cost of service charges and/or ground rent and ask your solicitor if anything is unclear.”
Do you have a money problem that needs sorting? Get in touch by emailing [email protected]
