Whether you’re buying your first home, moving to a more suitable place, or simply looking for a new mortgage deal, it’s important to consider all the financial matters that can affect your choices. Here, we’ve detailed the key issues that you should take into account:

Mortgages – how much can I afford?

Before you start thinking about applying for a mortgage, take the time to list all your income and expenditure to work out where you spend your money. You might even be able to find ways to save money, which can be put towards your deposit! The Money Advice Service has a free budget planner tool which can help you keep track of your money.

Listing your household expenditure can also help you plan for when bills increase (such as heating and electricity costs going up when you move into a bigger home).

When calculating how much they’ll allow you to borrow, all mortgage lenders will consider information such as:

  • The amount of deposit you’ve got to put down
  • Your income
  • Other financial commitments you already have (such as loans)
  • Your regular outgoings
  • If you are applying for a mortgage on your own or with someone else

You’ll need to have all this information to hand when you speak to a mortgage adviser, along with documents proving what you’re saying (i.e. payslips, bank statements etc).

Buying a house – what costs are involved?

Buying a home can be an expensive business, and there are several costs that you’ll need to consider when working out your budget.

Land and Buildings Transaction Tax (LBTT)

All properties costing over £145,000 bought in Scotland incur LBTT. Simply put, the more the property costs, the more LBTT you’ll pay. Here are the tiers and rates you’ll pay:

Purchase Price LBTT Rate
Up to £145,000 0%
Above £145,000 to £250,000 2%
Above £250,000 to £325,000 5%
Above £325,000 to £750,000 10%
Over £750,000 12%

 

 

Mortgage arrangement or set-up fees

Glasgow Credit Union doesn’t charge any setup or arrangement fees, but some mortgage lenders do.  Often you will be given the option of adding these fees onto your mortgage – but if you choose to do this remember that you’ll be charged interest on it for the duration of your mortgage.

Buildings and contents insurance

Buildings insurance covers the structure and permanent fixtures of your house. Mortgage lenders will ask you to have sufficient cover in place to protect their investment if your home is damaged by flood or fire etc. Contents insurance covers your possessions (including furniture, clothes, white goods, jewellery, art, tech equipment etc) in case of loss or damage. You’ll be able to arrange a mortgage without this in place, but it makes good sense to have adequate contents cover.

Life insurance

Mortgage providers will want you to have life insurance in place that would pay off your mortgage if you die before the mortgage is repaid in full. Life insurance also provides your dependents with some security.

Legal fees

The legal process that needs to be followed to transfer ownership of a property is called conveyancing and is carried out by a solicitor. Take the time to find out what services your solicitor will provide and always get a quote up-front.

Valuation fees

Your chosen mortgage lender will need to carry out a valuation of the property to satisfy themselves that the property is mortgageable and worth what you’re offering. There may be a cost incurred for this, which you will have to cover, and it will vary depending on the value of the property.

Moving day costs

The cost of hiring a removals company will vary depending on how many boxes you need moving, and the type of property you’re going from and to. The price will also increase if you’re moving a long distance from your current property.

Other costs

Unless you’re downsizing, chances are your Council Tax and utility bills will rise so make sure to take these into account when working out your new budget. Your local council will be able to tell you what Council Tax band of your new property, and you can also find this information in your Home Report.

Mortgage rates – how would a change in rates affect you?

Mortgages tend to run over a long period of time, and during that term it’s likely that interest rates will change. This should be taken into account when choosing what type of mortgage deal you opt for, and also in your future planning. The cost of a rise in interest rates will vary depending on your mortgage circumstances (how long your mortgage term is, how much you owe and what type of deal you’re on). Would you still be able to afford your mortgage if your mortgage rate was to rise?

Life changes – could you still pay your mortgage if your circumstances change?

There are lots of reasons your circumstances might change after you’ve secured a mortgage. Life changes like having a baby, being made redundant, or suffering a bereavement can all affect your ability to make payments on your mortgage. If you do find yourself struggling to make your mortgage repayments, always contact your mortgage lender as soon as possible to explain your situation and find out what options are available to you.

Free advice is available from a number of sources:

Some general good advice

Make sure your credit score is in the best shape

Your credit score or rating shows how you manage your finances and helps lenders make decisions on whether you’ll be able to pay the money back. If you have a bad credit rating or have failed to qualify for the products you want, these tips could help you improve your credit score:

  • Check your credit report with credit reference agencies
  • Prove to lenders that you’re capable of managing your finances effectively
  • Always make payments on time
  • Register to vote on the electoral roll
  • Close unused credit card accounts
  • Check if your credit rating is linked to another person
  • Reduce or clear any outstanding debt before applying for new credit

Build up some savings

When taking on any debt, it makes sense to have savings to fall back on in case your circumstances change. There are loads of different savings accounts available on the market to choose from, all with different rates, benefits and tie-in periods. Think carefully about what you want from your savings account before you start to ensure you’re getting an account that suits your needs. Glasgow Credit Union savings accounts run alongside your loan or mortgage and allow instant access, should the need arise.

For more information on Glasgow Credit Union mortgages, contact our mortgage team on 0141 274 9933

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YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

Information contained above is specific to the requirements of Glasgow Credit Union. Other lenders requirements may vary