The common mistakes made by first-time buyers (and how to avoid them)

In this month's edition, we start off by passing our advice onto first-time buyers on how to avoid common mistakes when purchasing your first home. 

We also detail what the abolition of Section 21 could mean for landlords, there's news on how supply and demand are outstripping Brexit concerns in the market and finally, if you're wondering how to get the best mortgage, why not read our guide on how to get a good mortgage deal?

<span style="text-align: center; display: block; width: 100%;">The common mistakes made by first-time buyers </span><span style="text-align: center; display: block; width: 100%;">(and how to avoid them)</span>

 

There’s no denying that purchasing your first property can be an incredibly exciting process. Everything from your first viewing to deciding which bread bin goes best with your new kitchen can feel like a thrill, but that doesn’t mean that there aren’t a multitude of things to avoid as you look to buy your first home.

But don’t fret! We’ve outlined the most common mistakes that first-time buyers when looking for the property of their dreams, and what your best practise should be instead.

Seal an agreement in principle
First thing’s first; get an agreement in principle from your lender in place first. The importance behind getting this step resolved is that it will give you an idea of how much your mortgage provider will allow you to borrow, and given that they’re often valid for 30-to-90 days, you should have the best part of three months to search for the right home before you need to get the agreement re-evaluated.

The benefit of getting what’s also known as a mortgage promise in place is simple; should you find a home you love and need to act fast, there’s no guarantee that you can find a loan big enough for you to buy it. With that in mind, figuring out the amount of money that you have at your disposal is vital.

Check your credit score
Another simple thing, but one that is also frequently missed. Checking your credit score prior to applying for a mortgage can save you a large potential headache; if you have a poor credit score then you run the risk of your mortgage application being rejected, which will cause further damage to your score. An early check of your score prior to applying for a mortgage can allow you to correct errors and get your credit rating in a healthier place.

Do your sums!
The process of buying a home is about much more than the price of a property; you have to factor in valuations, house survey costs, legal fees and conveyancing. These financial hits can seem unreasonable, but again, they’re vital to making sure that the property you’re buying is in good condition. With that in mind, make sure that you have enough money for these vital parts of the purchasing process, too.

What’s going on locally?
We all have certain criteria for the area that we’ll be moving into when it comes to choosing a home. Are there good schools nearby? What about shops or park space? Are the transport links sufficient for your work or other needs?

Research the local area; find out if this place will meet your needs and provide what you require in order to enjoy your life. If you’re able, spend a bit of time walking around and getting a feel for the place. Moving home can be an emotionally overwhelming process, so the more you know about your new area, the more settled you’ll feel once you move in.

Ask questions and don’t be afraid to get advice
It’s important to know what you want out of a home prior to conducting viewings, and it certainly does not hurt to have an idea of what questions you’d like to ask before you start visiting properties. Ask the sellers why they’re thinking of leaving, for example, or how long they’ve lived at the property, whilst testing out things like taps, windows and lights.

Beyond that, seek professional advice from an impartial mortgage broker. This is key, as a broker can assist you with setting up a financial plan, help you to find a good deal on a mortgage and get the ball really rolling on the buying process.

How to get the best deal on your mortgage

 

It’s practically step one on every homebuyer’s to-do list; get your mortgage approval so you know what your budget is for your property search. However, don’t just stick with your own bank or jump at the first mortgage which is offered to you; follow our tips to help you to get the best deal on your mortgage.

Deposit
Often the biggest hurdle to buying is the deposit itself, but spending more here should save you money in the long-run; the general rule is that a larger deposit will result in a more favourable rate as well as having a favourable impact on credit scores with lenders. With mortgages categorised according to their loan-to-value (LTV) – the percentage of the mortgage as a value of the property – the more equity you have, the lower risk you are to the bank.

Shop Around
It may seem like the easiest option is to simply take out a mortgage with the same bank that you conduct your personal accounts with; however, this will restrict your view on the mortgage market to a single lender. Looking around independently will help you to learn about the mortgage jargon and understand exactly what kind of proposition will suit you best. Comparison services will do a lot of the legwork for you, but remember that some of these require services charge, so if you can, find a no-fee broker.

Avoid bumps in the road
Having your documents in order seems like common sense, but a sure-fire way to having your application declined is to have inconsistencies in your paperwork. If you have recently married or changed address, for example, ensure that your documents reflect the correct details. Whilst you’re updating and verifying your documents, it’s certainly worth registering for the electoral roll as this has a huge bearing on the scoring system for lenders.

Fixed rate or tracker?
Put simply, a fixed rate mortgage locks in an interest rate for a specified time period, whereas a tracker mortgage has a variable interest rate which follows, or “tracks”, an external interest rate – frequently the Bank of England’s base rate. Deciding on which mortgage variant to take out depends on your financial situation; if you can afford to potentially pay higher mortgage amounts should the rates rise, then taking out a tracker mortgage could give you a lower starting rate to begin with. Alongside this, it also allows the opportunity that over the duration of the mortgage, you end up paying cheaper than if you had a fixed rate. If you need to know exactly how much you will be paying each month, then a fixed mortgage could be the best choice to avoid any unwelcome surprises – even if the initial rate is higher than other offerings.

Credit score
Having a great credit score is a huge help when it comes to getting an attractive mortgage rate, as lenders are keen to lend to those with a good history. Also, if you have a smaller deposit then it is essential to have an impeccable credit score, whereas having a larger deposit will result in more leniency if you have a lesser credit score (although you may struggle to achieve “high street” rates). If you want to cultivate the best credit score possible then there are a few steps you can take immediately; ensuring any outstanding debts on credit cards etc. are paid in full each month to show a strong payment history and clearing any outstanding debt are a good place to start.

Supply and demand outstripping Brexit concerns

 

With the Brexit date being pushed back once more, it would appear that supply and demand for property is now the driving factor in the market, with Brexit taking the back seat in terms of market-driving factors.

In a recent survey from property investment company SevenCapital, nearly 69.5% of investors continued to invest in the United Kingdom despite the spectre of Brexit. Indeed, this confidence in the United Kingdom property market is echoed by international investors, with nearly 95% of the Hong Kong respondents believing that Brexit isn’t a critical factor in their investment decision.

SevenCapital points out that the Sterling has risen in value – a better indicator of fiscal stability – and this outweighs any potential impact that Brexit may have levied upon the market. With the average price of properties increasing last month by over 1% or £3,347, according to Rightmove, then house prices are also reflecting this upturn in the market.

In terms of the rental market, rental yields have also grown in recent months with the best performing areas in Birmingham and Manchester seeing yields driven up as much as 10%. With new changes in the rental sector such as the Tenant Fee Ban and Section 21 changes, tenants and potential tenants should be feeling more empowered in terms of their rights which should encourage more renters into the market.

Despite the headlines that Brexit has provided of late, it is evident that other factors are driving the property market, both sales and lettings. A key point to note is the lack of housing supply and increased demand of late with this duality keeping the market buoyant, despite any political uncertainties. With first-time buyers now at record levels and keen to buy, there is a whole new swathe of potential buyers entering the market which is creating an extremely competitive sales environment.

What could the abolition of Section 21 mean?

 

With the recent reforms taking place in the lettings market with regards to the Tenant Fee Ban and the Fitness For Human Habitation Act, you would be forgiven for missing the recent news from the Government that will make it more difficult to evict tenants.

Plans to abolish Section 21 – the right for landlords to evict tenants from their property after their fixed-term contract has come to an end, and with no need for a reason to be given (as long as eight weeks’ notice is allowed) – have caused some uproar in the lettings community with landlords concerned and tenant campaign groups hailing it as a “massive victory.”

The main concern highlighted by landlords has been around difficult tenants in their property and how they will now be able to evict them. The short answer is that once Section 21 is abolished, landlords will have to enact Section 8, which has more stringent rules with regards to evictions, as highlighted below.

A tenant can only be evicted with Section 8 should they:
Fall into rental arrears
Are involved in criminal behaviour
Are involved in antisocial behaviour
Have broken terms of the rental agreement (such as damaging the rental property)

The Government intends to add some caveats to Section 8 in order to make it more fit-for-purpose in the absence of Section 21, such as the fact that landlords will also be able to evict tenants should they wish to sell the property or move back into the dwelling themselves.

Of course, despite the news that this Government proposal has created, the actual likelihood of a landlord evicting a tenant is low as that is counterproductive. Landlords do not evict tenants for no good reason as that is simply not good business; instead, the motivation to find and retain tenants is the modus operandi for every landlord in order to get some returns on their investment. So, if you are worried about the potential changes which the abolition of Section 21 evictions could cause, then rest assured that should the genuine need to evict a tenant arise, you will still have the power to do so.