Specialist Financial Adviser from Wesleyan Financial Services, Gareth Stainsby, dispels common misconceptions surrounding buying your first home…
Dentists are among the most trusted medical professionals, forming an important pillar of society. This esteem provides a range of benefits, including the milestone of owning your first home in a shorter time frame than you may have thought possible.
Here’s how you can get your ducks in a row in order to achieve your goal:
Take advantage of your professional status
If you're a qualified dentist – or in some cases still training – you may be eligible for a 'professional mortgage'. Lenders offering these mortgages will take your professional status into account and potentially offer you a loan without requiring you to have the standard two to three years’ worth of self-employment history many think is necessary.
This is where having a Specialist Financial Adviser can benefit you, as they have knowledge of and access to thousands of mortgage deals – many of which are not available on the high street.
Even if certain mortgage deals are available, this doesn’t necessarily mean the lender will make you an offer due to your profession. Having an adviser who can clearly present your dental profession remuneration on your behalf will help in this circumstance, effectively acting as the conduit between you and the lender.
Develop good saving habits
As a fledgling associate, you may be experiencing more wealth than you have previously managed, and this can be daunting.
Consider splitting your cash savings into pots – for example, emergency funds, tax money and longer-term cash savings – rather than letting this excess income sit in a regular account. Having various pots of money is good practise for getting used to budgeting and structure, which will prove to be useful for managing your finances effectively when you own your home.
If you’re looking to save for your first property within the next five years, you could consider building up your savings in a Lifetime* ISA. So long as you meet the criteria, you will be eligible to receive a government bonus on top of what you’ve saved once you’re at the point where you are completing on your first property.
You may not want to buy your home within this timeframe. If you do not expect to buy a property for at least five years, there are other options available. For example, we can help clients grow their deposit funds, which offers the potential for better returns than cash.
Just remember that the value of investments can go down as well as up, and you may get back less than you invest.
*Help to buy ISAs are now closed for new subscriptions, but for those that already hold them they can be topped up and, if criteria is met, will benefit from a government top up.
Do your homework
Produce a household budget detailing your monthly income and expenditure. This will help to demonstrate that you're making a realistic application and pro-actively manage your personal finances.
Include all household bills as well as essentials such as food and clothing. Be honest and make sure the figures on your budget will tally with those on the last three months bank statements you will need to supply with your application.
Boost your credit score
Try to clear any debts you have, such as personal loans and credit card bills. Lenders will reduce the amount they are willing to lend you if you hold unsecured debt, so if it’s not necessary, pay it off.
Other areas that can increase your credit rating include setting yourself up on the electoral role and owning a credit card, as having no credit history can also be problematic when applying for your first mortgage.
With a credit card you can simply make a few purchases and pay them off in full and on time over a few months. By paying off the full balance each month, you’ll enhance your credit rating but not pay any debit interest. This will help individuals who have lived at home and haven’t previously had examples of living costs.
Prepare for the unexpected
Before buying a property, you need to build up an emergency fund to help with unexpected home bills – a broken boiler or roof repairs, for example.
On top of this, there may be unexpected costs related to the house purchase, such as stamp duty (referred to as LBTT in Scotland and LTT in Wales).
It’s also important to remember that lenders base mortgages on the lower end of the offer price or property valuation. If you’re bidding over the odds, you’ll need to make up the difference from your own savings.
There’s a lot of talk in the media about the deposit required for a new home. There are more lenders coming back and offering 90% loan to value lending again, but having a higher deposit typically leads to an impact on the interest rate offered.
Saving a little extra will help you cover any unexpected costs so that you don’t lose your dream home, as can sometimes be the case.
Looking for advice?
If you’d like to discuss buying your own home, or any aspect of your personal or business financial needs, you can book an appointment with a Specialist Financial Adviser from Wesleyan Financial Services.
Your mortgage is secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.