Letter of the Law

First Time Property

by Iain Senior - Director of Property Services, Miller Hendry

Despite the recent announcement from the Bank of England to increase interest rates to 5%, the housing market in Perthshire continues to be buoyant. Attractive interest rates combined with higher income multiples for borrowers and incentivised lending in the form of cashbacks, fixed and discounted lending rates all help to make buying your first property easier.

Before even starting to look for property or speaking to a lender the first time buyer should work out what he/she can comfortably afford to spend each month. They must take into account premiums in respect of insurances to protect against accident, sickness & un-employment. If the loan is a joint one then death cover is also recommended to protect the survivor in the event of the death of the joint borrower. These come on top of provision for day to day living expenses.

A recent announcement by a high street lender offering loans of up to five times income emphasises the importance of ensuring that borrowing is kept at an affordable level. In 2003 interest rates stood at 3.5%. Today’s rate of 5% represents a rise of 43%. Over the same three year period the average pay packet will have risen by, on average, 10%. So the borrower, who in 2003, borrowed up to the hilt may be struggling to meet today’s increased repayments. Never lose sight of the fact that lenders are commercial people and in the event of default will foreclose on a loan.

Once the arithmetic has been completed the next step is to arrange to meet with a mortgage adviser. Now, when I say a mortgage adviser I do not mean the mortgage adviser from one of the High Street Banks or Building Societies. They are generally restricted as to what they can offer and from whom.The first time buyer needs to meet with an adviser who can offer loans from a multitude of lenders including the High Street banks and Building Societies and who can also offer insurance and protection products from a range of providers. Often the best place to contact such an adviser is through a firm of solicitors and estate agents.

Appointing a solicitor at this time is also recommended as they can take immediate instruction to act. Once the first time buyer has selected the mortgage that best fits their needs and has a solicitor in place then the house hunting can start!

Having chosen the desired property, their solicitor needs to be instructed in order that an offer can be made on the buyer’s behalf. The critical thing from a purchaser’s point of view is to speak to a well established and reputable firm of estate agents and there is much to commend one which can offer independent mortgage and financial advice and in addition legal services through the solicitors to which the estate agent is affiliated.

www.millerhendry.co.uk