03 June, 2021
3 takeaways from our webinar with The Homebuyer Coach
On Tuesday 1st June we held an exclusive webinar with The Homebuyer Coach, all about how to get started with saving for your first home.
Missed it? No worries. There are 4 more events to come - and in the meantime, here's a rundown of the key takeaways plus highlights from the live Q&A.
1. Buying a home isn't an investment
Let's bust some myths.
Myth #1: “You can’t lose”
Myth #2: “It is always better to own than rent”
You might make a profit if your property goes up in value, but it’s your home above all else. And even if the value rises, it’s irrelevant while you still live there or move within the same area.
Before taking the plunge, ask yourself if now's the right time to sink savings into a long term commitment and take on the responsibility of a large long term debt.
2. Debt can reduce how much you can borrow
Existing debt repayments can affect how much a mortgage provider is willing to lend you.
Here's an example for a couple with a total annual income of £44,000.
If you have £0 debt, your borrowing potential is £193,070.
But if you have a £350 pm car finance payment and a £2,500 credit card balance, your borrowing potential is just £157,165.
That's a difference of £35, 905 - and that kind of cash can go a long way in the property market. That's why you should aim to pay down any existing debts before applying for a mortgage.
3. Homebuyers need an emergency fund
Emergency savings can come in very handy when you move into your first home. If anything goes wrong that isn't covered by your insurance, you'll be on the hook for the costs.
Plus, mortgage lenders love to see that you have some spare cash in the bank. From their point of view, it means you're more likely to be able to cover any unexpected costs and less likely to fall behind on mortgage repayments.
Q: Should you instruct a solicitor before getting the mortgage agreed? What about the risk of losing money to the solicitors?
A: It's quite normal to start the process before you get the mortgage offer. But as you say, there is a risk you could lose money if you do not get the mortgage approved. If you're willing to possibly delay the purchase slightly, you can wait until you have the mortgage approved before instructing a solicitor.
Q: Given interest rates are so dire, where should you store an emergency savings as to not lose value? Stocks and shares seem favourable but they aren't suited for emergencies given it takes a while to withdraw the money.
A: For your emergency fund, we would always recommend cash-backed assets so that it's not at the whim of market volatility. Yes, inflation can be a problem and you can lose money over time. You should have at least 1 month's worth of outgoings in easy access accounts and for the rest you can use fixed-term accounts which often pay higher rates.
Q: I currently rent and I'm looking to buy in the north west, but my bank accounts are registered at my parents' address. Is this an issue for mortgage brokers?
A: This could cause an issue with lenders, mainly around anti-money laundering rules. We would recommend that you change the address with your bank so it matches your rental address.