The average house price in the UK at the moment is £205,240. While that may sound like a lot – this year is set to be a great time to get on the Property Ladder. Growth in house prices is set to decrease from 4.5% to 2%, so now may be a better time than ever to get a mortgage. Owning your own house is a popular life milestone – it’s truly a place you can call your own! But how do you get on the property ladder? We have a few little hints and tricks to share with you…
Sort out your finances
The trick to sorting out your finances is to get your head out of the sand and dive right in! It’s way less daunting than you think and can even reduce stress and give you peace of mind. Becoming a homeowner is one of the most expensive things in life for many people – but it’s certainly not out of reach…even if you have a small budget. Sorting out your finances means you’ll have a clear vision of what you can afford and how much your mortgage payments will cost every month. Make a note of your regular income and, if applicable, your partner’s. Then work out how much you can comfortably afford to pay per month on your mortgage, taking into account bills, council tax, food and any other essentials. Don’t forget to account for all the extra fees that come with buying a house, such as stamp duty, deposits, estate agent fees and so on.
Save, save, save
If you haven’t already saved a nest egg aside, then now is the time to save, save, save! The higher your deposit, the lower your mortgage payments – so it really does pay to save. Most mortgages require you to pay at least a 20% deposit, although if you can’t realistically see yourself paying this much, then your best bet could be the Help to Buy scheme. You can buy a minimum of 25% of your home and as much as 75%. If you need an extra boost with savings then the Help to Buy ISA. This is where the government offers first-time buyers a bonus on your savings every month. For example, if you save £200 per month, the government will add £50 per month as a bonus. This can be a great boost for your savings and you could be on the property ladder earlier than you think.
An alternative way to get on the property ladder is shared home ownership. A lot of housing developers offer shared ownership – so you’re never far away from the scheme! You buy a share of 25 – 75% of your home and pay a reduced rent on the rest of the share. It’s a very affordable alternative because you’ll pay a much lower deposit too. If you want to own a larger percentage of your home, you can buy shares anytime…a method called ‘staircasing.’ It’s highly recommended for low to moderate income households because it’s only available to household incomes of £60,000 or less.
Slightly different to share ownership, shared equity is where you buy your home with a minimum of a 5% deposit, a mortgage and an equity loan. Shared equity means you’ll have a lot more control over your home compared to shared ownership, but if you don’t keep up with the mortgage or equity loan repayments, your house can be repossessed.
Don’t fall for something out of your budget
This may be glaringly obvious, but it’s so easy to fall into this trap. When you’re searching for your first home, you’re more than likely to come across several ‘dream homes’ just out of your price range. Don’t fall for this – in the long-run, it isn’t worth it because there’s a high chance you’ll find another home perfect for you and your budget. After all, good things take time!
Help from the family
We don’t mean asking your relatives for money, we mean taking out a family arrangement loan. You’ll need a 5% mortgage but a relative can add a further 15%, for example, to your deposit through providing their own home as security.
Call in the experts
Buying your first home can be a little overwhelming with all this complicated jargon and numerous costs. That’s why it’s well worth it to get expert advice to help you do everything properly and save money on fees. Use a mortgage advisor to find out how much you can afford and a solicitor to sort out all the legal paperwork. The estate agents may recommend certain conveyances, but you can shop around and find your own – it can save you some cash!
Making an offer
Once you’ve saved up your deposit and dealt with all the paperwork, you can make an offer on your first home. You’ll be surprised at how much negotiating goes on! Make sure you go in with a maximum bid that’s still within your budget (including costs). Never get carried away and go over your maximum bid – you’ll cause yourself a lot of stress and financial strain in the long-term. Remember – you’ll still need to save money aside for repairs and renovations because there won’t be a landlord to help out this time.
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