If your children or grandchildren dream of owning a home but have no idea how to get on the property ladder, share our guide to becoming mortgage-fit in two years.
Two years to go…
It can take up to six months for a house sale to complete. This means if you want to be in your house in two years’ time, you have just 18 months to save a deposit.
How much money do you have and how much can you afford to save each month?
It can take up to six months for a house sale to complete. This means if you want to be in your house in two years’ time, you have just 18 months to save a deposit
Be realistic and set budgeting goals that you know you can stick to. Sacrifices will have to be made, but being too strict means you are less likely to hit your savings target.
Budgeting mobile phone apps such as Yolt, Money Dashboard, or Squirrel may help you to stay on track.
Find out if family members are in a position to help with your deposit. If not, it is better to know now.
Opening a Help to Buy ISA with a bank or building society could boost your savings.
For every £200 you save, the Government adds a £50 bonus up to a maximum of £3,000. And any interest earned is tax-free.
However, you cannot get your hands on the Government’s top-up until after your property purchase is complete, so you must have enough of your own money to cover the deposit.
20 months…
Check your credit score with services such as Experian, Equifax, Noddle, or Clearscore.
This will give you a good indication of whether you will be accepted for a loan.
For every £200 you save, the Government adds a £50 bonus up to a maximum of £3,000. And any interest earned is tax-free.
Ratings are commonly measured out of 700, with a score of 380 or higher considered good.
If you have a low score, lenders will view you as a risky borrower and could reject your mortgage application outright or hike its interest rate.
You can make simple changes to improve your score. First, register on the electoral roll to make it easy for banks to verify who you are.
Add your name to utility bills to build up evidence that you can keep up with regular bills.
Consider taking out a credit card to demonstrate to mortgage lenders you can manage debt responsibility — just be sure to never miss a payment.
18 months…
Visit a mortgage adviser. Your local bank or building society can tell you about its mortgages, but it’s better to use a mortgage broker who can compare every deal on the market.
Websites such as unbiased.co.uk or vouchedfor.co.uk can help you find an adviser near you and will tell you how much they charge for advice.
Beware that some advisers only have access to a limited number of banks and building societies.
Once you’ve found a broker, you’ll be invited to complete a mortgage interview in person or over the phone where you are asked detailed questions about your finances.
Daniel Bailey, of broker Middleton Finance, says that his tip for first-time buyers at their initial mortgage interview is to be honest.
‘There is no point in lying, or hoping that debts registered at a previous address or at Mum and Dad’s house will not be found. The bank will track them down so it is far better to declare them at the start,’ he says.
Websites such as unbiased.co.uk or vouchedfor.co.uk can help you find an adviser near you and will tell you how much they charge for advice
At the end of this meeting, you should know how much you will be able to borrow based on your current circumstances.
To stay motivated it’s a good idea now to sign up for alerts for homes in your price range with property websites such as Zoopla and Rightmove.
One year…
View as many houses as possible. Try new areas, but don’t forget to consider travel costs and check what council tax band applies to the property.
Mortgage lenders will take these costs into account when they calculate how much you can borrow.
Your house purchase may seem a long way off, but any financial decision you make now, however small, could derail your homeownership dream.
Frequent use of gambling websites, exceeding your overdraft or missing credit card repayments could all hamper your chances of getting a loan.
Chris Schutrups, managing director of The Mortgage Hut, says it is around the 12-month mark that keen budgeters are tempted to have a splurge.
He says: ‘A young couple came to see me to find out how much they could borrow for their first mortgage, and then went away for 12 months to save up.
‘The husband was an air traffic controller who, for the first two years of his career, had been on a low salary.
‘During the 12 months of saving, he completed his training and his wages shot up. He celebrated by buying himself a Range Rover.
‘When they came back to see me before making an offer on a house, I had to break it to them that his monthly car payment of £1,200 meant they could no longer have the mortgage.’
With six months left your deposit should be in the bank, so it is time to narrow your property search. Get your second viewings booked and go back to your mortgage adviser
Six months…
Your deposit should now be in the bank, so it is time to narrow your property search.
Get your second viewings booked and, while you mull over your final choice, go back to your mortgage adviser.
Your adviser will first review your application for any changes in your personal circumstances such as wage rises or increased financial outgoings.
They will then apply to your chosen bank or building society for a so-called ‘Agreement in Principle’.
This is an informal mortgage offer that sellers typically require before they will take their property off the market.
Once you have this, you can make an offer.
And three months
With just a few months left and armed with your mortgage offer, it may be tempting to relax with your finances.
But any slip-up at this late stage could scupper your plans.
Mortgage offers are usually valid for six months. If, for any reason, it takes longer to complete the house-buying process, then the bank will need to reassess your application.