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Dealing with home insurance as a first time buyer

 

You’ve secured the mortgage, paid the fees, and you have chosen your dream first home, but the work isn’t over once you move in. After the challenging experience of first time buying, insurance can often take a back seat. Here’s some helpful guidance on choosing home insurance and how it will protect your new investment.

What is home insurance?

Home insurance is often split into two parts – building and contents insurance. Put simply, building cover insures damage to your physical property (the bricks

house floodand mortar) from unfortunate and unforeseen events such as fire, flooding and weather damage. In places which have high risk of weather damage, such as flooding, your choice of insurance providers may be limited and premiums may be more expensive.

Contents insurance covers all of your belongings, from your laptop to your fridge, and protects them from potential theft, loss or damage.

Do I have to have it?

While you pay off your mortgage your home is technically still “borrowed” from your mortgage lender, therefore they will most probably require you to take out building insurance to protect their investment. However, you don’t need to use your mortgage lender to obtain your insurance. Shop around to compare coverage, there are plenty of price comparison sites such as Confused.com that can help guide you.

How much is my home worth?

It’s highly important to get the right type of cover for your home, so giving your insurance company truthful and accurate answers, when they ask you questions, is essential. Your insurance company will most likely ask you the rebuild cost of your home, which means how much it would cost in total to build your home from scratch again. Many people get a surveyor to help calculate this amount; however you can get an accurate estimate by using the Buildings Cost Information Service’s free online calculator.

Contents insurance is slightly easier; you just need to estimate the worth of all of your valuable property. Money Supermarket has a great online calculator to help you calculate the value of your property.

Do I need to update my insurance?

Planning on a fancy extension? Or dreaming of a spectacular loft conversion? You’ll need to have a chat with your insurer as any changes to your home may affect the rebuild cost. If you don’t change your policy to match any changes and you become underinsured, you may be left to pay the extra if anything was to happen to your home.

Are you a recent first time buyer and have any helpful advice on home insurance? Pop your tips in the comments below.

 

Image Credits: Wikimedia

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Understanding Stamp Duty

You hardly need reminding that it’s tough to to be a first time buyer. But one problem – and it just happens to be Britain’s oldest tax – has become easier.house

This is of course Stamp duty, originating in the 17th century and imposed to cover the cost of registering a change in ownership at a government office called the Land Registry.

This process requires a stamped certificate from Her Majesty’s Revenue and Customs – the tax man to you and me – but HMRC will provide this only when the duty is paid.

So how is it easier?

Well, stamp duty used to be charged on a ‘slab’ basis. So buying a home for £250,000 meant you paid the old charge of one per cent duty on the full price, making it £2,500.

But if you bought, say, a £260,000 home you would have been in the old three per cent category applied across the whole price – so the duty would become a whopping £7,800.

This slab system was considered unfair and a disincentive for buyers. Therefore stamp duty in England, Wales and Northern Ireland is today levied like income tax.

Up to £125,000 it’s zero, and over £125,000 to £250,000 it’s two per cent. Then from over £250,000 to £925,000 it is five per cent.

On that £260,000 home you therefore today pay no duty up to £125,000, then two per cent above £125,000 to £250,000, and then five per cent above £250,000 to £260,000.

It adds up to just £3,000 and in this example saves you £4,800.

There are a few exceptions to stamp duty – but don’t raise your hopes.

There’s no duty at all on zero-carbon homes (but these are rare) while some Right To Buy properties, where tenants purchase their council home, have reduced duty. In Scotland, stamp duty doesn’t exist but there is Land and Building Transaction Tax which is roughly similar and means that north of the border, our £260,000 home would cost £2,600 in LBTT.

Across the rest of Britain buyers of almost all homes sold for above £125,000 have no choice but to pay stamp duty within 30 days of moving in.

In reality, it happens quicker because it’s handled by your conveyancer – that’s the expert you will have instructed to handle legal elements of the purchase.

Sometimes a mortgage lender may offer to add the stamp duty to the loan for the house. It sounds tempting but try to resist: saving for stamp duty may be tough but it will cost less than adding it to a mortgage on which you repay not just the loan itself but interest as well.

One final thing – it’s always buyers who pay stamp duty. That’s not really unfair because as you move up the ladder and sell up, so someone will pay duty to buy from you.

 As the saying goes ‘What goes around, comes around.’

Image Credit: Geograph

graham norwood

Author Bio

This article was provided exclusively to First Home News by Graham Norwood, a successful journalist who specialises in writing about residential property. Read Graham’s blog at Property News Hound or follow him on Twitter.

 

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How to make yourself more attractive to lenders

How to make yourself more attractive to lenders

Getting your first mortgage is an exciting yet daunting journey; many people discover that the road to home ownership is more like climbing a mountain than taking a gentle stroll. With obstacles such as large deposits and rising house prices (to name but a few), we’ve compiled some handy advice on how to make yourself, and your situation, more attractive to lenders.

Check your credit
Your credit report is your financial history; the better your score, the more likely your lender will be to give you a mortgage. Improve your chances by checking your credit rating before you apply. Have you missed any payments in the past? Have you gone into your overdraft recently?

Another issue you need to be aware of is your partner’s or ex-partner’s credit score as this can greatly impact your mortgage application.

You can discuss your credit score with your bank or you can use popular websites such as Credit Expert, which will give you a free credit report if you sign up for a trial.

Register to vote
If you’re not already on the electoral role, get on it! Lenders often check it to ensure that you are being truthful about where you currently live and their decisions can be greatly impacted if you have yet to register. To sign on to the electoral role, or for more information, simply go to Gov UK.

How is your income?
How much you earn is extremely crucial to lenders as they use multiples of your total income (and joint income) to decide on the maximum that they will lend. It isn’t just about having a higher salary; you also need to ensure that you keep all important documents such as benefits letters or payslips (lenders usually ask for at least three to six months’ worth), as these will be analysed during the decision making process. Self-employed? You will need to provide three years’ worth of accounts instead. Have a lower income? There are plenty of schemes that may help you get on the ladder such as the new Help to Buy ISAs.

Stick with your work
Have you had several jobs for the past few years, or are you dreaming or a new career? While going through the mortgage process it’s best to put those plans on hold and stick with your current job (even if you hate it!). Not only do lenders need a regular amount of payslips, it is important for them to see that you are consistent with your income.

Clear your debts
Essentially, with a mortgage, you are about to commit to one of the largest debts of your life. Therefore, it is sensible to try and lose any outstanding debts that you may have. Lenders use any current debts, along with income and outgoings, to provide you with the maximum total that they can offer you. Although this might mean your dream of home ownership has to be pushed back a year or two, it will definitely benefit you in the long term.

 

Have you found that you have struggled to be accepted for a mortgage?  Let us know any other tips you found were useful for making the process a lot easier.

Image CreditWikimedia

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What can first time buyers expect to get for their money?

 

It’s no secret that getting on the first rung of the property ladder can be an extremely difficult task, with many first time buyers struggling to meet the high costs involved with purchasing their first home.

According to Rightmove first time buyers can now expect to pay an average of £169,414 to get their foot on the ladder – that’s an increase of 7.6 per cent on last year’s figures. A recent report by The Independenlondon flats 2t also revealed that unaffordable housing is forcing first time buyers out of the home towns they’ve grown up in and love.

So, what can first time buyers expect to get for their money?

London living

Reports claim that those hoping to buy in the notoriously expensive London need to be earning a whopping £77,000 a year to afford the capital’s average house price of £384,856. However, if the national average of £169,414 is more in your price range, you’re likely to be looking at a one bedroom flat in north London or The Isle of Dogs. The sizes may be “bijou” but many would argue that the lack of space is a small price to pay for the opportunity to live so close to the big city and all it has to offer.

A quiet lifeisle of wight
If you enjoy the open air, a slow pace of living and love the sea, perhaps a house across the Solent may be of interest?  You can buy a spacious three bed semi  in the more rural/coastal parts of the Isle of Wight, offering outside space and with a beach never more than 20 minutes away. You can expect to get a lot more for your money than if you buy around the nearby commuter belt of the south east.

 Go up north
Moving further up north to Cumbria, you could enjoy a three bedroom detached property in areas such as Wigton or Windermere. Prices generally are lower in the north with many areas such as Leeds in Yorkshire or the suburbs of Newcastle offering semi-detached or terraced properties with a garden for the average asking price. However, you may find that prices begin to rise the closer you get to the city centre – notably in the larger cities such as Leeds, where you could possibly purchase a two bedroom apartment for the same price as a house several miles down the road.

 How are you finding prices in your area? Do you plan on buying closer to home, or do you have to look elsewhere for something more affordable?

Image Credit: GeographGeograph

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An easy breakdown of the home buying process
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An easy breakdown of the home buying process

The house buying process can be a complicated and hugely time consuming process. If you’re juggling it with your full time jobs and family commitments, it’s not hard to see why people begin to feel the stress. Whilst we can’t lighten the workload for you, we can give you a helping hand when it comes to understanding the whole process. If the strain of starting the home moving process is starting to feel like a burden, here is our simplification of the home buying process.

Get prepared

House buying is a big life decision, so it’s important that you don’t head into the process without doing a reasonable amount of research. Getting an understanding and background knowledge will be a big aid, and make the process of home buying much more straight forward. As with most things, having a greater understanding will allow you to make a more informed decision further down the line.

Find your mortgage

A crucial factor when buying a home is to ensure you get a mortgage that is well suited to your financial situation. Again, this will involve copious amounts of research and homework. If you’re unsure what types of mortgage are out there, it’s worth looking into, and getting the facts straight in your head before going out into the market.

Place your offer

Once you’ve got your mortgage lined up, viewed homes and are now ready to proceed, it’s time to put in an offer on what you want to be your new home. If you’re a first time buyer, you’ll have less constraints, as you won’t have an existing home up for sale slowing you down. Usually, you’ll put your offer in through your estate agent, as they will help your deal go through as smoothly as possible.

Source your solicitor

Now for the legal aspects, you’ll need to get yourself sorted with a solicitor, in order to handle the paperwork surrounding your impending move. It’s important that the finer details of your move are scrutinised ahead of signing your papers, so having a trusted solicitor on your side is an important addition.

Get it surveyed

Another crucial step is to ensure that you arrange for a survey of your new property to be carried out, to make sure that your new home has been thoroughly checked over and is valued at the price you’re paying. There are a number of different surveys and reports which can be carried out, from the cheaper condition report to the most comprehensive option of a structural survey.

Exchange contracts

Once your solicitor and surveyor are happy, it’s time to sign the contract and move ahead with the purchase. It’s at this point you’ll have to start the expenditure, as you’ll usually have to lay down 10% of the total price as a deposit. It’s important to know that once you put down the deposit, you’re committed to the sale, meaning that if circumstances change any you need to pull out of the deal, you’ll likely lose your deposit.

Finalise it

Upon completion, the property finally becomes yours. It’s time for you to get your keys and the deed to your first home. The completion of your purchase means you’ll now have bills to pay; the 90% of your home which you’re yet to pay for is transferred from your mortgage lender to your legal representative, and then on to the seller’s representative.

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Top tips to finding your perfect home
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Top tips to finding your perfect home

Buying your first home is a hectic, but exciting time in your life. On one hand, there is nothing like finally taking that prized ownership of your own personal space. On the other hand, it is stressful because in many respects, as buying a home can leave you in a financially tight situation, and provide you with a lot of work. While it isn’t uncommon for homebuyers to make  negotiation errors during the process of buying a home, these mistakes are easily avoidable. If you’re on the hunt for your dream first home, here are out top mistakes that you should avoid.

 

Get it checked

One of the biggest and most serious mistakes that homebuyers can make during the buying process is to opt out of getting a professional to provide a thorough property inspection. When purchasing a home, you’re likely to allocate funds towards remodelling rooms and new furniture. However, without a pre-purchase home inspection, you could find yourself unaware of any number of  structural issues  or deficiencies in the home. You can avoid this issue by hiring a professional to conduct a pre-purchasing home inspection.

 

Pricing

Another common mistake that homebuyers make, especially when purchasing without an estate agent, is that they will easily overpay for a home. While not doing a pre-purchasing home inspection leads to overpaying, so does not reviewing the pricing of homes in the area. Therefore, to make sure you aren’t being overcharged, do some research and review the prices of homes in the area. It will give you an idea of range you should be paying in and give you negotiating power when talking with the seller.

 

Don’t get carried away

Don’t fall into the trap of growing too fond of a property before having a full research and view of properties. Try to stay relatively neutral throughout viewings,  whilst you want to make it clear you have an interest in the home, showing over exuberant enthusiasm for a property during a viewing or the negotiation process can spell trouble. Usually, the seller will notice your feelings and gain the upper hand, which will result in you paying more.

 

Why is it for sale?

One trap that many homebuyers fall into is to not question why the seller has put their home in the market. While in some cases, the seller wants to move elsewhere, it can also be the case that there are other issues. Therefore, in order to protect your investment and add to your negotiating power it is a smart move to ask why the seller has their home on the market.

 

Keep Your Options Open

Sometimes, home sellers notice when a homebuyer is desperate to buy a house. This scenario immediately increases the seller’s power, and reduces your negotiating chances. Also, you do not want to put all your hopes into one home. Thus, when searching through homes, it is best to keep your options open. Look through a number or properties and make a list of your favourites. This will help you keep calm when facing negotiations with a homebuyer and increase the chance that you’ll get the property that you want for a fair price.

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Top 7 blogs for financial advice
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Top 7 blogs for financial advice

Buying your first home is exciting, but  can be equally as nerve wracking. It is a major decision which requires a lot of research, planning and most importantly; financial budgeting. Once you have raised afunds for your deposit, you may be left struggling financially; however by finding ways to make a little extra money, starting to manage your living expenses more effectively and spending your money more wisely you will soon find a more stable financial footing. Here is our guide to the best blogs on the internet if you’re these helpful hints and tips than from some of the best and most influential finance blogs.

  1. Couple Money (@elle_cm) centres on finding ways to build your finances together as a couple, and aims to educate couples on ways to live on one income whilst having fun with the other! Check out their posts on how to pay off your debt faster, how to build your savings and ways to earn more in the meantime.
  2. Magical Penny (@magicalpenny)  is a personal finance blog which strives to “help you to grow your pennies through conscious spending, automatic saving, and simple, low cost investing”. His posts range from turning your hobby into a money maker, varying house prices, energy comparison shopping and helpful tips when getting a mortgage. It’s definitely a helpful one for a first time home buyer.
  3. Young Adult Money (@davidcarlson1 ) encourages the balance of earning more and spending less, something which can seem like an impossible task. Again this is one to help those of you in your 20s and 30s, with the blog covering topics as diverse as real estate, making more money, cutting expenses and even travel. This blog should be the go to guide for all financial savvy young adults.
  4. Help me to save (@karenbryan) is a blog devoted to helping you spend less, save money and enjoy life. Not only is there advice offered on money saving tips, but posts also focus on providing helpful ideas for making money and ways of managing your living expenses more effectively.
  5. Master the Art of Saving (@MasterTAOSaving) is a blog written for those who want financial tips written in an everyday conversational style. Created by Jen Perkins, the site states outright that it is not a professional financial service, but is a source for easy to read tips and advice. Although it is American, it has a readership that far exceeds that nation, and the tips and advice can easily be applied to UK home owners looking for financial tips.
  6. Young and Thrifty (@youngandthrifty) Kyle and Justin created Young and Thrifty when they left University after having beaten student financial issues. Having then been faced with new financial challenges as young adults such as making investments and getting a mortgage, they have turned to blogging to offer tips from their experience. They now cover all bases on the key issues for first time buyers such as investing, banking, taxes, real estate, and ways to monitor your day-to-day spending habits.
  7. Phillip Taylor Money (@PTMoney) is all about finding ways to build wealth, spend money wisely and make extra income. This blog will help you to discover the best rates when it comes to credit cards, bank accounts and even mortgages. Phillip gives his top tips on saving money, spending wisely and making extra money a read to stay financially secure and savvy.

Have we missed off your go-to blog when you’re looking for sound financial advice? If so, make sure you drop us a comment below.

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Extra fees to be aware of when moving home
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Extra fees to be aware of when moving home

When planning a home move, it can be a costly period of time. With home buying fees and organising your removals, it can take a big chunk of both your budget, and your savings. If you have an impending move, and you have a tight budget to stick to, you don’t want to under cost the value of the jobs at hand, and end up being stung by additional fees. In order to prepare for your move, here is what to look out for.

Legal fees

When buying a new home, it’s likely you’ll need to hire a solicitor or licensed conveyancer to handle the legal areas associated with the move. It’s important that for aspects such as transfer of ownership/funds that they’re done by a professional. Legal fees typically cost anything between £500 and £1,000. It’s easy enough to find the right person or organisation for you, and often can come down to a good word-of-mouth referral.

Stamp duty

Most homebuyers have to pay Stamp Duty Land Tax on home or land purchases over a certain value amount. If you buy property for more than £125,000, you pay Stamp Duty Land Tax of between 1% and 7% on the whole purchase price.  If you’re unaware, Stamp Duty is charged at different rates according to the price of the home or land. The rates rise incrementally in brackets, which are set by the government and can be found online.

Valuation/survey

Before being approved a mortgage, it’s highly likely that your bank or lender will insist a valuation is carried out on your new home to ensure that  it’s worth the price you’re willing to pay, giving peace of mind to both yourself and the lender that  the property is a reasonably sound purchase. As valuations are the cheapest type of survey, you may want to spend a little more and have a more thorough check carried out. Whilst they might be a more expensive option, they do provide further insight into any potential problems a home may have.

Buildings insurance

Insurance is hugely important, especially when it comes to a property, and it will be required as a mortgage condition in most cases. Obviously, the policy will need to take effect from the date of exchange (when you take possession of your new home).

Contents insurance

Another piece of important insurance you’ll require is for your home contents. It’s important that both old and new items are covered at your new address, and means that should any disaster strike, your belongings won’t be in jeopardy.

Removal firm/van hire

One expense that is an optional one, is that associated with hiring removal services for your big move day. When it comes to shifting your belongings, the budget option here is to do the removals yourself, in which case the only real expense you’ll encounter is van hire and fuel costs. However, if you’re not so keen on the idea of taking all the responsibility in your hands, and want the experts in to take control of the situation, a removal firm should be more than willing to accommodate most of your needs.

Utilities

Whilst you might get away without doing this through the summer, in winter, you want to avoid moving into a cold, dark home. To make sure your new house is habitable upon arrival, make sure that the gas and electricity is connected before you move in. The seller will probably have informed the utilities companies of a change of ownership, but it’s important to remember that you’re not in any way obliged to stay with the same providers.

Council tax

This one is sadly unavoidable, with this payment going towards local council services such as  your rubbish collection, policing and other municipal costs. It’s divided into eight bands, from the cheapest A band, to the most expensive homes, which fall into the H band. Similarly to stamp duty, it all relates to the size of your home, so it’s worth bearing in mind that, should you move from a smaller premises to a larger dwelling, your council tax bill will probably increase.

 

Image credit: CC image via Alan Cleaver from flickr.

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Taking the first step on the property ladder is cheaper than you think
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Taking the first step on the property ladder is cheaper than you think

We all know how notoriously difficult it is to take that plunge and get onto the first rung of the property ladder, and with house prices back on the rise, more young adults than ever are opting to stay in their parental home whilst saving. However, even amidst rising house prices, first time buyers struggling to get on the property ladder can now buy a new two-bedroom home in Hartlepool with a mortgage which will cost them just £230 a month; making it the perfect first step on the property ladder.

National house builder Keepmoat is offering customers with a salary of at least £14,000 a chance to own a £79,995 home at its development at Alexandra Square in the town centre of Hartlepool. The homes, which are available under the government’s Help to Buy scheme, can be purchased through a 35-year mortgage product, perfect for customers on modest incomes.

The exceptional value of the homes available at Alexandra Square mean local people can now aspire to buying their own home, with potential monthly mortgage repayments as low as £230. Even with the falls we have seen in property prices in recent years getting on the housing ladder can be difficult for those who do not have substantial incomes. Combined with Help to Buy it makes purchasing a new home an increasingly attractive proposition for first and second time buyers. And with a choice of homes on offer at Alexandra Square there’s something for everyone, whether families or young professionals.

Alexandra Square is a development of 83 two and three-bedroom homes located within 10 minutes’ walk of Hartlepool Marina with its boats, watersports, attractions and mix of bars, cafes, shops and restaurants. The development is also in a good catchment area for schools and transportation links. The new homes offer great access to nearby Hartlepool town centre as well as Durham, Sunderland and Middlesbrough.

Alexandra Square is part of a £9 million regeneration scheme, which is a key to the North Central Hartlepool Masterplan, and is being funded jointly by Keepmoat, Hartlepool Council and the Homes and Communities Agency (HCA). For more information or to reserve your dream home, please visit check out Keepmoat’s website.

Copyright free image courtesy of pallspera

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Three step guide to mortgage research
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Three step guide to mortgage research

To many, taking the plunge and grabbing onto that first rung of the home buying ladder is a big and extremely scary step. One of the most important plunges in life can be securing a mortgage, as it’s not something that you’ll forget about, and will inevitably lead to years of repayments. Whilst is can be a scary process, securing a mortgage and buying your first home is also one of the most exciting life experiences. If you’re looking to secure a mortgage, here are our tips on how to make the correct decision.

Step One: Check out your current financial providers

As a starting point, to provide you with an initial idea, it’s worth contacting the banks and building societies who already provide you your current and savings accounts. If that’s more than one bank, then check with them all and begin to work up an idea of what offers are available to you. We aren’t guaranteeing anything, but from time to time, if you have accounts, previous mortgages or other connections with a bank, they can offer you a more attractive rate. Obviously, if you ring your bank, they’re going to give you a fairly one sided set of options, as they undoubtedly push their products. Make sure that all information provided is then noted down and researched further, to ensure you know the ins and outs of each option. Once you’re in the know about the options provided by your current banks and building societies, you have a solid base, and can begin to shop around to compare deals.

Step Two: Analyse the market

The next step for you to take is to gauge the state of the rest of the market. There are a load of great online tools for comparing finances, so make sure you have a good study of the available options from other high street providers. It’s not as simple as one option standing out above the rest, as most mortgages offer tailored features depending on what your financial situation is; many have a range of differing features and charges that you’ll need to consider, so make sure you do your due diligence and give your research phase plenty of time.

What to look out for: The Annual Percentage Rate is one factor that is important when you’re assessing options on the market. This figure takes into account the cost of fees on top of the interest rate quoted – for example booking and arrangement fees, valuation fees and other add ons. Obviously, finding a low rate that suits you, and ties in nicely alongside all the other aspects of a mortgage is of utmost importance.

Dates of significance throughout the life of your mortgage: You need to make sure that you’re aware if there are any dates where fixed, capped or discounted rates will come to an end.

What rate you revert to after any initial rate ends: If an option does have an initial discounted rate to start, you need to ensure you’re aware of what rate it will drop to once the introductory rate comes to an end.

How flexible are payments: One option that may be available to you is to select a mortgage with flexibility. It’s important to know whether you are able to make overpayments without being penalised with a charge.

 

Step Three: Talk to a mortgage broker

If you feel out of your depth when it comes to hard hitting finance, the best option you have available is to get in touch with an independent mortgage broker to provide unbiased help and information. Generally, mortgage brokers fall under two general categories. Firstly, there are brokers who offer advice scoping the whole of the financial market, entirely independently. This means that any advice will be given in your best interest, without attempting to steer you in the direction of particular service providers. There are also, however those which offer a restricted service – based on products from a limited number of lenders. Whilst both are entirely different from advisers in a bank, you should opt, if possible to speak with a broker who advises over the whole market.

Taking on board these expertise are a vital aspect of the selection process, and for a relative financial rookie, it’s definitely a wise move.

Are you a new home owner who has recently secured your first mortgage and home? If so, we’d love to hear from you, and be sure to add any possible pieces of advice in the comments box below!

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