Best Tips for Buying Your First Home
Everyone dreams of getting on the property ladder. And, while many have the income to easily afford a deposit, others are welcoming the support of government schemes such as Help to Buy or Shared Ownership. Either way, the property market has seen a massive increase in first-time home purchases recently. Over 50% of recent buyers are the ones just starting to climb the almighty property ladder.
If you are yourself in the market for a first home, follow the tips and tricks laid out below by our estate agents to ensure a successful and fruitful transaction.
1. Save Your Savings
Unless you were born with a silver spoon in your mouth, in which case congratulations, you will need to save up to afford your first home. To do that, your first step will be to see how much you are able to save each month. Plus, what minimum deposit you will need in order to access a mortgage.
As far as the property prices you can expect go, estimates show that the average price of a first home in London is almost double than what it was 10 years ago, namely over £450,000. This means that the average mortgage deposit has also risen.
Of course, that does not mean that the capital doesn’t still have some property hotspots than offer better home prices, many times along with very easy commutes. So, there is no reason to worry. You will still be able to find good value for money and accessible options.
If you are able to save more than the minimum deposit, you will be able to get better mortgage rates and a lower monthly payment. That’s why one of your priorities should be how and where you keep your savings.
2. Research Mortgage Options
With so many mortgage options out there, it’s best to invest some time into doing some research. If you are unfamiliar with the term, a mortgage is a form of bank loan for purchasing a property. Until you pay back the loan and the related interest, the lender will hold a mortgage right over your property.
A mortgage broker can help you navigate your options better if you find this task daunting and if financial planning is not your forte.
Generally, the type of mortgage you can access will depend on how much deposit you were able to save, as well as your credit score. You will need to present proof of your income and outgoings to potential lenders and evidence of your financial profile.
The general costs associated with a mortgage are:
• Arrangement fee
• Valuation fee
• Monthly repayments.
The most common types of mortgages are:
• Fixed-rate mortgage – where the interest rate is constant throughout the length of the loan
• Tracker mortgage – where the interest follows the benchmark interest rate set by the Bank of England
• Discount mortgage – where the interest rate is tracked at a discount to the lender’s SVR for a particular length of time
• Standard variable rate mortgage – where the interest rate is controlled by the lender
• Guarantor mortgage – when you cannot get a mortgage on your own and take on a guarantor
• Offset mortgage – where you can link your savings accounts to your mortgage.
The best way to secure more chances of getting a good mortgage rate is saving a bigger deposit. You should also consider cancelling any of your unused credit cards and improving your credit history, as well as keeping a steady job.
3. Government Scheme Eligibility
While you are doing your research, it’s a good idea to look into the different government schemes available for first-time home buyers. See what applies to your area and what you may be eligible for.
Help to Buy is a popular option for people with smaller deposits. The minimum deposit required to buy a new home is 5%. You can benefit from an equity loan for newly-built homes in England with a price tag of up to £600,000. Your contribution needs to be 80% of the value of the property (by deposit and mortgage) and the rest is supplied by the Government.
Shared Ownership is also a good option for getting on the property ladder. You can buy shares between 25% and 75% and you will be sharing ownership of the property with a housing association until you are able to buy off the entire property.
The Right to Buy scheme for council and housing association tenants allows you to buy a property at a discounted rate in England, Wales and Northern Ireland if you are a council tenant. There is also a Right to Acquire scheme available for housing association tenants who have had a public sector landlord for at least 3 years.
4. Consider All the Costs
Buying a home is about more than just securing a deposit and a mortgage. You will need to take into account several purchasing as well as maintenance costs. In the beginning, you will incur costs for obtaining the mortgage, survey and lawyer fees, valuation fees, and stamp duty at least.
Once you buy the home, you will need to have money aside to redecorate and move in. Then, you will have the monthly mortgage payments to cover, as well as the property’s monthly maintenance costs.
5. Choosing a Home
When you are considering buying a first home, you surely have your heart already set on certain neighbourhoods. So, after you start saving up and checking your mortgage and government scheme options, you’ll need to start hunting for the right property.
The property market is very diverse. Homes come in all shapes and sizes. And, most of all, with all kinds of price tags. To narrow down your options, ask yourself the following questions:
• What size home do you or your family need? A house or a flat?
• Do you want a property you can renovate? Or a modern property with lots of amenities?
• What areas match your budget?
• How far from public transport do you want the property to be?
• What is the longest commute you would feel comfortable with?
• Does the area have good amenities nearby (like chain stores and green areas)?
Once you decide on these initial aspects, it’s best to enlist the help of an experienced estate agent who knows more about the area you’ve chosen. They can help you to further narrow down your options and set up viewings for the properties that match your needs best.
Bear in mind that estate agents are usually very knowledgeable about an area’s characteristics and amenities and also have access to properties that are not yet on the market. So, having a good estate agent on your side will give you better chances of scoring a good property.
When you view a property, check how long it has been on the market and whether other offers for it are already on the table. Also check if the seller is ready to move once the transaction is finalized or whether they need time to secure a new home for themselves. While you are there, see how the neighbours are and what they think of the property. Also look at what amenities you have nearby and how secure the area feels.