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:
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:
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 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%|
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.
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.
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.
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.
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.
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?
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:
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:
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.
We’re committed to working with members, local organisations,
and employers to increase financial awareness in the wider community.
For more hints and tips check out our Financial Wellbeing Hub,
which includes articles and guides covering everything from budgeting to getting onto the property ladder.
The information contained above is specific to the requirements of Glasgow Credit Union. Other lenders requirements may vary.