Gareth Stainsby dispels the common misconceptions surrounding buying your first home and how to get your finances in order.
As a dentist, you form one of the pillars of society as one of the most trusted professions. With this comes its own benefits to help you achieve the milestone of owning your own home in a time frame shorter than you might 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. They will 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 dental financial consultant can benefit you. They have the knowledge and access to thousands of mortgage deals. Many of which are not available on the high street.
Even if certain mortgage deals are available it doesn’t necessarily mean the lender will make you an offer due to your profession. Having a consultant who can clearly present your dental profession renumeration on your behalf will help in this circumstance. They effectively act 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, longer term cash savings etc. Rather than letting this excess income sit in a regular account.
If saving for your first property within the next five years, consider building up your savings in a lifetime individual savings account (ISA). As long as you meet the criteria you would 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.
Help to buy ISAs are now closed for new subscriptions. For those that already hold them you can top them up. If criteria is met, they will benefit from a government top up.
You may not want to buy your home within this time frame. If you do not expect to buy a property for at least five years there are other options available where we can help clients grow their deposit funds, which offer the potential for better returns than cash.
Please remember the value of investments can go down as well as up and you may get back less than you invest.
Finally, having various pots of money is good practice for getting used to the budgeting and structure. This is really useful for managing your finances effectively when you own your home.
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 proactively 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. If it’s not necessary, pay it off.
Other areas that can increase your credit rating include setting yourself up on the electoral roll 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. For example, stamp duty (referred to as LBTT in Scotland and LTT in Wales).
Also, remember lenders base mortgages on the lower of the offer price or the property valuation. If you’re bidding over the odds, you’ll need to make up the difference from your own savings.
There is 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. Although, the higher deposit you can introduce 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.
This article first appeared in Dentistry magazine. You can read the latest issue here.
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