I have never been one to think that paying rent is a waste of money – after all, it is one fixed fee to provide a roof over our heads, however, 2019 is the year that Tony and I look to buy a house together. Our situation is a little bit different to most people’s because we are directors of a limited company we need to wait until the end of our second year of trading (which falls in May this year) before we can apply for a mortgage. We are using the time leading up to this to get ourselves as ready as we can.
Getting a mortgage is a really big step and can be a stressful time. That is why we are working on preparing ourselves properly before we apply for our mortgage. By giving ourselves a few months to get everything sorted we can make time every fortnight or so to make changes that will help us.
Saving for a deposit
It goes without saying that we have needed to start saving for our house deposit. The minimum house deposit we can get away with is 5%, but the bigger the deposit we can put down the more favorable mortgage rates we can find.
In order to help us to put aside money for our deposit, we have been treating it as a regular monthly bill that goes out when we are paid from our business.
If we were to just save the money left over every month then we would have probably just spent the money. Treating it like a bill has meant that our savings have been increasing every month automatically.
Cut back on spending
Whether you are applying for a mortgage or not, we could all do with cutting back on our spending to save money.
When applying for a mortgage there are two reasons for this. First of all, we need to show that we can afford to repay the mortgage based on our current spending, and secondly, the more money we save the bigger deposit we can raise.
Since deciding that we wanted to buy a house together we have been able to make some cutbacks to save extra money. They include:
- Switching our energy supplier to a cheaper supplier (saving £150 per year)
- Cancelling our TV license because we don’t watch live tv or BBC iPlayer any more (Saving £150.50 per year)
- Meal planning (saving us around £1,300 per year)
- Driving less (saving us around £260 per year)
We are also considering every purchase before we make it, to decide if we really need it. We definitely aren’t perfect, and sometimes buy items we probably don’t need, but taking a moment to think about our purchases first helps us to figure out what is more important to us.
Checked our credit reports
When applying for a mortgage, creditors will look at your credit report to assess what sort of borrower you will most likely be.
A credit report is an overall picture of your borrowing history. It shows:
- Your available credit and existing accounts
- Your repayment history
- Any bankruptcies or court judgments
- Whether you are on the electoral roll
- Any recent credit applications
- Anyone you are financially associated with (things such as a joint bank account or mortgage)
Since a mortgage application is a really big application, we want to ensure that our credit reports are as accurate as possible.
Your credit report contains information about your credit history and this information is used to create your credit score where the higher the number, the better.
There are products out there for people with low credit scores, but these typically have a higher rate of interest compared to someone with a good credit score.
In order to look attractive to potential mortgage lenders, it is important that we keep our credit report looking healthy. There are plenty of ways that we can do this.
- Making sure the information is accurate and up to date – paying particular attention to the addresses and financial accounts.
- Making payments to existing creditors when they are due.
- Ensuring that we are on the electoral roll at our current address.
- If we no longer need credit and we have paid off a debt, consider closing the account.
We used CreditExpert to find out more about how lenders might view us, including finding out our credit score (the full price is £14.99 once the trial ends – see the website for full details), and I am not sure why we were both putting this off. We both found that our credit scores were excellent! I was so relieved to discover this and hopefully it will make our mortgage application easier.
Budget for extra mortgage costs
Getting a mortgage isn’t just a case of saving up for a deposit and calling it a day. Whilst saving for the deposit can be the hardest part, there are loads of extra costs that we need to take into consideration.
These can include fees from the mortgage provider, stamp duty and moving costs. Not to mention the things most of us forget about, like removal fees or buying new light bulbs at the new property.
We have been working on budgeting for these extra costs and putting money aside to cover them. We have found a great way to make extra money to cover come of these costs, which I will share next.
Decluttering our home
If you have been following me on social media then you know that I have been working hard to declutter our home recently. Whilst there is a chance that we will buy the house we are currently renting, we also want to be prepared to move if we need to.
Plus the more items we have, the more we will have to pay a removal firm to move them for us. Decluttering helps us to make some extra money by selling our unwanted items and saves us money in the long run.
There have been some really easy areas for us to focus on first – clothes, books, and DVDs have been easy to sort through before moving on to harder items like kitchenwares.
Any money we have made from selling our unwanted items has gone into a savings account to pay for extras when we move. If we don’t move house then we have started a nice home renovation fund.
If you are applying for a mortgage soon then I hope you find this advice useful. Let me know in the comments below if you are buying a house this year.
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