Last year, saw 408,379 people collect the keys to their first home. It was the first year the number of first-time buyers had exceeded 400K since 2006. If you were one of those first-time buyers, you might be feeling somewhat nervous about the future. Here are some tips to guide you.
Prepare for interest-rate rises
It’s fine to hope for the best as long as you prepare for the worst. If the Bank of England raises interest rates to combat inflation, then lenders will almost certainly charge more for mortgages.
If you’re on a fixed-rate mortgage then this will not impact you immediately. If you’re on a variable rate, it will. As the increase is only slight, however, you should hopefully still have room to manoeuvre.
Regardless of whether your rate is fixed or variable, it’s vital to avoid landing on your lender’s Standard Variable Rate (SVR). This means that if you bought early last year and had a one-year introductory rate, you need to move quickly to secure a new deal.
If you bought later in the year and/or had a longer deal, you have a bit more time on your side. Be careful not to let it go to waste. Put a note in your calendar so you remember to do your research and administration in good time.
Look after your credit record
When your current deal comes to an end, you’ll need to remortgage. This essentially involves going through the process of mortgaging all over again. Usually, your home will be revalued, your income and outgoings will be reassessed and your credit record will be rechecked.
The fact that you got a mortgage in the first place means that your credit record was at least in passable shape. You should, therefore, be able to keep it looking good just by keeping up the good habits. In particular, do everything you can to pay your bills in full and on time.
Additionally, check your credit records at least once a year for mistakes and signs of fraud. In either case, you want to take action as quickly as possible. The quicker you act, the more time you give yourself to deal with issues before they become a potential problem.
Be careful what changes you make to your house
One of the benefits of being a first-time buyer is that, for the most part, you can do what you like to your house. There are, however, two key points to keep in mind. Firstly, even as a homeowner, you need to stay on the right side of planning regulations. If you’re in any doubt as to whether or not a change you make needs planning permission, check until you are sure.
Secondly, updating your home may not actually add any value to it. Even if it does, it may not add as much as you spent. In principle, this is fine if it brings you joy and you can afford it. In practice, it may mean that you miss out on an opportunity to improve your loan-to-vehicle ratio.
In other words, if you’d saved the money you spent on home renovations and remortgaged for a lower amount, you could have been better off financially. Which is more important is entirely a judgement call. What matters is that you think through any decisions carefully and make them mindfully.
Make sure you have the right insurance
Insurance is not “set-and-forget”. Check your cover at least once a year. Make sure that you have the right type of cover as well as the right level of cover. This can save you from nasty financial shocks that could seriously derail your finances.
Please contact me for advice or to make your mortgage application.
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