If you're a first-time home buyer, you probably have a whole host of questions: Is now a good time to buy? Should I wait for prices to drop? What about interest rates?
You're not alone. Many people find the world of mortgages confusing, but don’t worry— we are here to walk through the essentials you need to navigate the market with confidence.
At Calluna we make it our mission to demystify the world of mortgages and make things simple for you. Here’s our top advice for first-time buyers.
Market Timing: Why Waiting Might Cost You More
The market can be intimidating right now. Interest rates and house prices are shifting, and with economic events like government elections and global events, things can feel even less predictable. However, trying to “time the market” perfectly is a gamble.
The reality is, there’s rarely a perfect time to buy a home. The market will always shift, interest rates will rise and fall. Your best bet is to focus on what you can control: your finances, your goals, and the type of home that fits your lifestyle.
For example, if you look back at COVID days, interest rates for mortgages were rock bottom. You could get a very cheap mortgage. But on the flip side, we saw house prices dramatically rise and buyers needed to fund that difference. After a couple of years, house prices aren’t rising as quickly but mortgage rates are a lot higher.
In other words, waiting for rates to drop or hoping for a sudden fall in prices could actually cost you more in the long run. If you’ve found the right home that fits your budget, don’t hold back. Remember, your mortgage is a long-term commitment—rates will fluctuate, but over time, you’ll be able to adjust as the market shifts.
The Importance of Flexibility and Affordability
When buying your first home, flexibility and affordability should be top priorities. Consider how long you’ll stay in the home, what your budget can truly handle, and what your future needs might look like. Some buyers try to copy what friends or family members did when buying a home, but the best mortgage for someone else may not be the best one for you.
Focus on a mortgage plan that aligns with your current and future plans, not just what’s available at the moment. The more flexible you are, the easier it’ll be to adapt to future changes.
Financing: The Fundamentals You Need to Know
Before even looking at properties, take a good, hard look at your finances. Here’s a simple checklist to get started:
- Review your credit score: Banks will evaluate your credit score as a part of their decision-making process. Any missed payments, maxed-out credit cards, or outstanding debts could hurt your chances.
- Clean up your credit: Avoid “buy-now, pay-later” options like Klarna if you’re preparing for a mortgage. Using credit responsibly is key. Try to use less than 50% of your available credit and pay off your balance monthly.
- Check for errors: Sometimes, issues like a forgotten phone bill can show up on your credit report and impact your score without you even knowing. Services like CheckMyFile can help you check all four major credit agencies, giving you a clear picture of your financial standing.
Savings: Building a Strong Foundation with Your Deposit
One of the biggest hurdles for first-time buyers is the deposit. Ideally, you want to save at least 5-10% of the purchase price. Remember, a larger deposit can often mean a better interest rate and lower monthly payments.
The bigger the deposit, the less you’ll have to borrow, which reduces your mortgage costs. Plus, having extra savings can be helpful if you need to offer above the listing price to secure a competitive property.
If you’re struggling to save while paying rent, try cutting unnecessary expenses and sticking to a savings plan that will get you closer to your goal.
Additional Costs Beyond the Mortgage
When calculating your budget, don’t forget about additional costs beyond just the mortgage payment. Buying a home involves legal fees, surveys, moving costs, and sometimes stamp duty or land tax. These costs can add up quickly.
In Scotland, first-time buyers can qualify for a £600 reduction on the Land and Buildings Transaction Tax (LBTT). However, this discount may not apply to everyone or may be minimal depending on the property’s price. Make sure to use online calculators or talk to your mortgage broker about what to expect in your specific case.
Consult an Advisor: Why Expert Guidance Matters
You don’t have to go it alone. Mortgage advisers are there to help you understand the market, check for available schemes, and ensure you’re making the right choices. An adviser can give you clarity on whether schemes like Scotland’s LIFT are available and if they suit your needs.
Even if you don’t qualify for any special programmes, a good adviser can help you develop a mortgage plan that’s customised to your situation. Sometimes just talking with an expert can put your mind at ease.
Preparing for the Mortgage Process: Main Steps
If you’re ready to start, here are some concrete steps to get your mortgage application in shape:
- Get your finances in order: Pay off outstanding debts, ensure bills are paid on time, and avoid new credit.
- Check your credit score: Use tools like CheckMyFile to get a comprehensive view of your credit across multiple agencies.
- Save for a deposit: Aim for 5-10% of the home’s purchase price. The more, the better.
- Factor in additional costs: Include legal fees, survey costs, moving expenses, and any applicable taxes.
Following these steps will put you in a much stronger position and minimise stress during the mortgage process.
Consider Your Long-Term Goals and Non-Negotiables
While you might think of this as your “starter home,” consider what your needs may look like in 2, 5, or even 10 years. Will the location work if your family grows? Is the space sufficient if you plan to work from home? Defining your non-negotiables now will save you from frustration down the road.
For example, our Mortgage Adviser, Stephanie noted, “I thought I’d only be in my first home for a couple of years, but I ended up staying five. Moving can be more complicated than you think, so choose a place that can accommodate you for a while.”
Don’t Get Discouraged by Market Scare Stories
It’s easy to get intimidated by news headlines about market uncertainty or economic downturns. But don’t let scare stories put you off. There will always be someone saying it’s the wrong time to buy. The important thing is to make a decision that’s right for you and stay focused on your own path.
Speaking with a broker can help you get a realistic picture of the market and set a plan to buy when it’s right for you. And remember, property tends to appreciate in value over time. Buying a home is a long-term investment, and over time, its value is likely to increase.
Take Action: Why There’s No Perfect Time to Buy
If you’re ready and financially prepared, then now is the best time to make your move. The perfect time doesn’t exist; what matters is aligning your decision with your goals. Whether rates go up or down in the future, your primary focus should be on securing a property that meets your needs. In a few years, the market may look entirely different, and you’ll be glad you didn’t wait.
Stephanie sums it up well: “No one predicted COVID, no one predicted the housing market boom that followed, and no one knows what’s coming next. If you wait for perfect timing, you may end up waiting forever.”
Get Ready To Be A Homeowner
Becoming a homeowner is a huge milestone, and it’s natural to have some jitters. By understanding the fundamentals of the mortgage process, focusing on your finances, consulting with an adviser, and acting when you’re ready, you’ll set yourself up for a smooth buying experience.
At Calluna, we believe there’s no better time than now to start building your future. Connect with a mortgage adviser you trust, make a plan, and take that first step confidently. Owning a home can be one of the most rewarding moves you’ll ever make.
