Tips to help first time house buyers

Your house will probably be the most expensive thing you ever own, so ensuring that you make the right decision is very important. Before you decide to buy a house, make sure it makes more financial sense than other options such as renting, or house sharing. You’d be forgiven for feeling very overwhelmed at the prospect of having to save for a deposit, dealing with legal fees, understanding the jargon and the general stress that comes with buying a house. If this sounds like you, we’ve written a guide detailing the things you need to think about when buying a house!

How am I going to save enough for a deposit?

This is one of the most commonly asked questions and generally the first thing people freak out about! Commonly, the bigger your deposit and therefore the more equity you have in your home, the better mortgage rates will be offered. As an average rule of thumb, you will need to try and save a minimum of 5% or up to 20% of the cost of the property to get a mortgage. If you are a super saver and can manage to save 25%, you will be offered better deals.

A simple but effective way of saving efficiently every month, is transferring money into a savings account as soon as you get paid. This way, you are not tempted to spend! At the end of the month, if you have any money left, transfer this straight to your savings account.

Where do I start with getting a mortgage?

Unless you are in the position where you can afford to buy a house with cash, you are going to need a mortgage. Whilst the prospect of having a mortgage might sound daunting, don’t worry! You are in the same boat as most first time house buyers. It’s advisable to do as much research as possible when looking at what products are on the market.

You can learn about mortgages from the internet, keeping an eye on independent advice sites such as MoneySavingExpert, or using mortgage comparison websites to see what the best deals for you are. It’s worth speaking to family and friends to see who they have a mortgage with and whether they have had a positive or negative experience.

However, if you feel it’s still too much of a mine field you can book an appointment with your bank so they can advise you on the products they have available. Or alternatively, use a mortgage advisor who will scan the market on your behalf to find you the most suitable product.

When thinking about the type of mortgage you will need, it largely depends on the size of your deposit. The higher the deposit you are able to put down, the more competitive priced mortgage you will receive.

Since the credit crisis, lenders have tightened the security checks they put in place before offering customers mortgages. Before an offer will be accepted on a house, you will need to show a mortgage in principle. To obtain this mortgage in principle the lender will need to see evidence that you can afford to repay the amount you have borrowed. You will need to show evidence that you can manage your monthly finances as well as copies of your payslips and bank statements.

Have you thought about a first time buyer scheme?

It is widely recognised that in this day and age it can be extremely challenging trying to gather enough money together for a deposit on a house, this is why there are several government ownership schemes that have been set up in England, Scotland, Wales and Northern Ireland.

If you have managed to save a smaller deposit, you might want to take a look at the Help to Buy schemes that are available. Help to Buy offers people the opportunity to buy a house with just 5% deposit, however the value of the property you can buy will vary depending on where you live in the country.

How does Help to Buy work? This scheme is only available on new builds worth up to £600,000 and you will need to secure 80% of the value of the property through your deposit and mortgage, then the government will provide a loan for the remainder of the value. The schemes may vary depending on where you live, so make sure you double check what is available to you.

Another option that you might want to look at is shared ownership schemes, where you own a share of a property with another party. This party could be housing association or the builder that is responsible for the development the house is on. These schemes work by allowing you to purchase between 25% – 75% of the home’s value, meaning you will pay rent on the remaining value.

If you currently live in a council house or housing association tenant in England, Wales and Northern Ireland, you could buy your home at a discounted rate through the governments Right to Buy scheme. You could potentially get a discount of more than £100,000 on the value of your property. However, you will have had to live in the house for at least five years to be eligible for the scheme. If you are a housing association tenant, there is a scheme called Right to Acquire, which gives you the option to buy your home. However, you can only apply to purchase the property if you have had a public sector landlord for three years.

The morale of the story here is not to get despondent, there are always options, just make sure you do your research so you know exactly what you are eligible for.

What is stamp duty and why do I have to pay it?

Stamp duty was introduced in 1964 and is a tax that people buying a home must pay before their official moving in date. You might have heard some changes to stamp duty announced in the autumn budget, but what does this mean for first time buyers?

Well its good news for first time buyers! Stamp duty will be abolished for first time buyers, buying a property up to £300,000. If you are a first time buyer and you buy a property up to £500,000, then no stamp duty will be paid on the first £300,000.  The chancellor Phillip Hammond estimates that with these new regulations 95% of first time buyers would see stamp duty cuts, whilst 80% would pay none at all.

The cynics amongst us would say that actually this won’t make much difference, but hey! Every little helps doesn’t it.

What other costs do I need to think about?

Whilst we all know the biggest cost is going to be actually purchasing your property, there are other costs that you need to have included within your budget. For example when you enter into a mortgage agreement there will be a charge from the lender. Be aware that you may also be asked to cover the cost of assessing the value of property, this is known as a valuation fee.

Once you have the wheels in motion for purchasing your home, you will most likely need to hire a chartered surveyor to confirm that the property is structurally sound. Even though this may seem like another expense, it’s definitely worth having an expert check over your property, as they can flag potential problems before you sign on the dotted line. The cost of this survey can vary depending on the company you go with and how thorough the work is.

Another important cost to remember to ensure the sale of your property runs smoothly is that you will need to appoint a property solicitor, otherwise known as a conveyancer. It may be tempting to do this yourself, but seriously, leave the legal eagles to it! Your conveyancer will draw up your legal contract, deal with the Land Registry and manage your Stamp Duty charges.

Other potential costs that you might need to consider are hiring a removal company and any immediate redecoration you decide to do before moving in. Be mindful of this when you are deciding on what property to buy as if the property needs a lick of paint, this can soon add up in the overall purchasing cost.

House viewing check list

So let’s imagine you’ve been online, spotted a house you’re interested in what do you do now? Well you obviously need to go and look around the property, but what are you actually looking for and what questions should you ask? Fear not, we are here to help you with our house viewing checklist! Below are the top questions and things to look out for when viewing a property:

How long has the property been on the market?

If it’s been a while, then you may be able to negotiate on the asking price

Has the vendor got another house to move into?

It’s always sensible to make sure you know the vendors position. If they haven’t found another property to move into and you are in a hurry, this may add a few more months onto your timing schedule

What is included in the sale price?

By this we mean what fixtures and fittings are the vendor planning on taking with them? It’s good to have a view on this as if they are planning on taking all the light fixtures and curtain poles for example, you will need to budget to replace them

Are there any existing offers on the property?

Make sure you know the answer to this question as it will influence the amount you are prepared to offer

Make sure you take some time to look around the neighborhood and if you are feeling brave knock on some of the houses and ask people about the area. It’s always a good idea to get a feel for the people you may be living next too

Make sure you check that light fittings work, water pressure is adequate and if there is a gas or electric fire ask to see them working. It’s best to test anything that will be left in the property as you don’t want to have any nasty surprises when you move in

Whilst this seems like a lot of information, don’t panic you will get plenty of advice along the way and remember no question is a silly one, make sure you have all the information you need before making the plunge and purchasing a house. We hope this post has been useful, happy house hunting!

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