A broad understanding of their lives is needed, what they are hoping to do to meet their housing needs and what is important to them personally in dealing with their finances.
1) Timing - Buying a property is the biggest financial commitment that most people will ever undertake, which means it is important to take a holistic approach from the outset and ensure that buying a property is the right choice for the client at that time.
Brad Fordham, head of sales at Abbey for Intermediaries, said with first-time buyers, this will involve looking at their attitude to buying and making sure they are aware of the additional financial responsibilities that home ownership brings, not only paying the mortgage itself but the wear and tear of a property for instance.
2) Deposit - In today’s market (2011), the greater a deposit a first-time buyer is able to put down, the more competitive the mortgage they will generally be able to secure.
Brad Fordham, head of sales at Abbey for Intermediaries, said it may be the case that for some first-time buyers, they would significantly benefit from saving for an additional six or 12 months, to increase the size of their deposit and qualify for a more competitive rate at a lower loan-to-value (LTV).
He said: “Clearly they will also need to weigh up the benefit of saving for a longer period against any expected movement in house prices over that period but it is through highlighting these different options that intermediaries can really add value and support first-time buyers.”
3) Personal details - As well as confirming the size of a client’s deposit, intermediaries will need to establish basic information such as the borrower’s age, their employment status, UK residency status, how much they are looking to borrow and how quickly they need to arrange a mortgage.
According to Legal & General’s Mr Smith a question like, “Why are you buying the particular home you have chosen?” can tell you a lot about a client. And a question like, “What might stop you being able to stay in this home?” can show the protection needs the client may have.
4) Risk profile - Brad Fordham, head of sales at Abbey for Intermediaries, said it is very important to establish what the borrower’s risk profile is in terms of fixed versus variable, repayment versus interest-only, and short versus longer-term deals.
5) Payment flexibility - Intermediaries need to find out whether the borrower is likely to want to make overpayments on their mortgage, and their ability to cope with any changes to their monthly outgoings.
In particular, Legal & General’s Mr Smith said an adviser will need to establish the likely type of mortgage they will require – fixed (to provided security over their family budgeting) or variable (often giving greater flexibility if their needs may change). How long they want to borrow over is also critical.
6) Knowledge - Alongside these basics, Legal & General’s Mr Smith said an IFA should explore how much the client knows about the other costs of buying a home – stamp duty, surveys etc, and what protections they have got in place to protect their home and lifestyle over the longer term.
