You have been saving towards buying your first home and are ready to take the step onto the property ladder. Before you hit the streets to find your ideal home, take time to consider our guide below, to ensure you are best prepared to make the most expensive purchase of your life.
How much deposit do you need?
Before looking at properties, you need to save for a deposit. Generally, you need to save at least 5% of the cost of the home you would like. For example, if you wish to buy a home costing £150,000, you’ll need to save at least £7,500 (5%). If you are able to save a deposit greater than 10% of the house price, this is likely to give you access to a wider range of cheaper mortgages.
Make sure you are aware of the additional costs involved when buying a property
There are a number of additional costs involved when buying a home, which are sometimes overlooked. In addition to your deposit, you need to ensure you have budgeted for:
- Survey costs
- Solicitor and Mortgage Broker fees
- Removal costs
- Buildings insurance
- Initial furnishing and decorating costs
- Mortgage arrangement and valuation fees; and
- Stamp Duty (First-time-buyers will pay no Stamp Duty on the first £300,000 for properties worth up to £500,000)
Be realistic about what you can afford in terms of monthly payments
The most important thing to bear in mind is whether you can really afford to take the step to home-ownership. You should put together a budget before you start looking for a property, itemising your household income and outgoings. If you currently rent a property, you should have a good idea whether the level of rent you pay is comfortable. If you live with family, paying a mortgage every month is likely to be a big expense you are not used to.
You should also consider any changes to your circumstances that may be likely in the foreseeable future, eg starting a family would mean additional costs and usually a reduction in income.
Find out how much you can borrow and what mortgages are available to you
The easiest and best way is to talk to an independent/whole of market mortgage broker, such as findpeaceofmind.co.uk. They will be able to ascertain how much you will likely be able to borrow, advise you on the best mortgage(s) for your circumstances and find you the best deal. Once you are happy with choice of mortgage, the broker can provide and ‘Agreement In Principle’, which is a useful document that proves to a seller or estate agent that you have been ‘vetted’ and deemed acceptable for a mortgage.
Check out Affordable Housing Schemes and the government Help to Buy schemes
There are a number of government backed schemes set up to help and encourage you to get on the property ladder. Examples of such schemes are
Shared ownership – you buy a proportion of your home with a deposit and mortgage, and pay rent on the remainder.
Help to Buy/Shared Equity – The government lends you up to 20% of the price of a new home. You only have to pay a 5% deposit, borrowing the other 75% with a mortgage
Freehold or Leasehold?
If you wish (and can afford) to buy a house, you will most likely buy the Freehold, which means you will own the property and the land it sits on. On the other hand, most flats and apartments are Leasehold, which means you won’t own the ‘bricks and mortar’ of the building, or the land it sits on. You will usually pay a Ground Rent and Service Charge to the Freeholder or Management Company. These are additional costs that you will need to factor in to your cost calculations.
The first place to start is either speaking to Estate Agents in the area you wish to buy, or looking online on various websites that list properties for sale (rightmove.co.uk, zoopla.co.uk, etc). Once you have found your ideal home, don’t be afraid to make an offer lower than the sellers asking price!