Buying a property is a huge investment that will tie you into a long-term agreement. The first step you need to take before buying a property in St Albans is to see how much you can afford. We explain more about what goes into deciding how much a mortgage lender will loan to you and some of the other costs involved with buying a property.
Mortgage affordability
While each lender has their own way of deciding how much they will loan to applicants, they all use similar factors to help them reach a final decision. This will include things such as:
- Deposit: Having a large deposit means you have less to repay and you are seen as less of a risk by lenders.
- Credit score: Lenders will look at your history to check your reliability in repaying credit. It’s a good idea to ensure your report (which can be requested for free) is in order before making a mortgage application.
- Income: Most lenders will place a limit of around 4 to 4.5 times your total household income. The higher your salary, the more you should be able to loan.
- Outgoings: To ensure you can afford the mortgage repayments the lender will want to check your essential outgoings such as utility bills, food, travel, childcare and car maintenance to see how much you have remaining each month.
- Lifestyle: Lifestyle spending, for things such as entertainment, eating out, shopping, holidays, gyms etc. will also have to be taken into account. This is done by reviewing your spending patterns over the past 3-6 months. They will also consider future outgoings, such as university funds, childcare costs etc. to ensure future affordability.
- Interest rates: If interest rates rise above the standard variable rate (SVR) at a future date, the lender will want to ensure you will still be able to afford repayments. This ensures your budget is flexible enough to adapt to a change in circumstances.
Additional costs
Buying a house in St Albans doesn’t just involve the price of the property. You will also have to consider other costs that are attached to the purchase.
Stamp duty is one of the biggest additional costs, this type of tax is due on all properties in England, Wales and Northern Ireland worth over £300,000 for first-time buyers (there is currently a stamp duty holiday in place until March 31st, 2021, for properties up to £500,000).
You will also have to pay for things like building insurance, solicitor/conveyancer fees, estate agent fees and the cost of moving your belongings to the property. You may also have to pay for mortgage advisor and arrangement fees, depending on the lender.
Getting an estimate cost
The average price paid for a residential property in St Albans in 2020 was £504,647. If you want to get a clearer idea of how much you may need to pay in total, you can arrange an Agreement in Principle with a lender or mortgage advisor. This will give you a much better idea of the mortgage size available to you based on your circumstances. The agreement also puts you in a better position when it comes to bidding on a property as the seller has confidence you have a mortgage lined up and the arrangement is less likely to fall through.
Looking to buy a home in St Albans?
If you’re looking to buy a house or flat in St Albans, get in touch with our friendly team today who will be able to help with your property search and explain the buying process in more detail. Alternatively, you can browse our available properties for sale here.