Top things a first-time buyer should know

Written by the Money Advice Service

Moving into your first home is one of life’s champagne moments, but getting there could hardly be described as easy or fun. However, if you are prepared, it can at least be a little less stressful.

Test your knowledge

The more you know when you set out on this journey, the more time, money and effort you can save. Try our First-Time Buyer Quiz to see how well prepared you are for your big move.

Counting the costs

It’s essential to have a clear picture of how much money you’ll need to buy a home. Typically, you’ll require a deposit of at least 5% of the property’s sale value. So, if you have £8,000 saved up, you’d look for a house valued at up to £160,000. In reality, the properties you would consider would cost a bit below your upper limit, as you’d need to be able to cover a whole range of additional costs, including solicitor fees, mortgage fees, survey costs and perhaps stamp duty. These costs will add several thousands of pounds to your outlay, so work out an estimate with them taken into account.

Government help

If you’ve found it hard to save a large deposit, you could take advantage of a government scheme, such as Help to Buy. There are two Help to Buy schemes.

With the equity loan scheme an initial interest-free loan of up to 20% of the value of a new-build property is made available to help you onto the property ladder.

The Help to Buy mortgage guarantee scheme was introduced to increase the number of mortgages that only need a deposit of 5%, with interest rates that are more affordable. There are a small number of products available at the moment, but more mortgage companies will be bringing out their products over the next few months.

For more information about Help to Buy visit Rightmove’s Help to Buy page.

Picking the right mortgage

Speak to a mortgage broker or your bank or building society early on in the home-buying process, as you’ll need expert advice on what type of mortgage to opt for. This will be based on your personal circumstances and attitude to risk.

If you want the certainty of knowing what your monthly payments will be your broker may suggest a fixed- rate deal, which means the amount you pay each month remains the same for a set amount of years, typically two, three or five years, and sometimes longer. Fixed-rate mortgages aren’t susceptible to changes in the bank base rate, unlike variable-rate mortgages.

With a variable-rate mortgage the amount you pay each month can change to reflect any change in the Bank of England base rate. The Bank of England base rate has been at a historic low since March 2009, so if it does change it is likely to go up.

Check out Rightmove’s Mortgage Calculator which helps you work out your likely monthly payments, based on different interest rates and repayment terms.

Shop around

Having spoken to a broker or your bank or building society, take time to research what mortgages are available. Price comparison sites are a good place to start looking.

Ongoing costs

Once you have moved in, it’s important to have a budget in place that takes into account the mortgage, bills and other outgoings. Also, don’t forget to start saving so that you can cover emergency and maintenance costs as they arise.

Money will be particularly tight during the first month or two after moving in. However, if you stick within a budget, things should start to get easier at time goes on.

For more useful first-time buyer money tips visit the Money Advice Service.

All information accurate as of 31/10/2013.

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