Sallyanne, our new homes manager, gives
you a step-by-step guide for first-time buyers; how to position yourself for a
successful transition on to the UK property ladder.
First thing’s first –
Affordability.
Before you start planning for your
purchase you will need to understand what your spending limits are. There are a
couple of ways to go about this; you can either approach your bank for an appointment
to find out the best mortgage deal they can offer you. This will involve
providing them with a host of personal information, mainly your income and
outgoings This will allow them to determine your affordability. They will then
inform you of the maximum amount they would be willing to lend you. This comes
in the form of a document which is known in the industry as an AIP (Agreement
in Principle) or a MIP (Mortgage in Principle). This needs to be kept safe as
it will need to be presented to your estate agent when you are looking to make
an offer on a property. This is a way of proving that you can afford the offer
you’re putting forward.
Many buyers go one step further
and employ the services of an independent mortgage broker. The benefit of going
with an independent is that they don’t work for any one particular bank or
building society and often have a much broader range of lenders to choose from.
In most cases, this means you will have access to a better deal through an
independent broker. Loveitts New Homes recommend Salcey Mortgages. Contact them
via www.salceymortgages.co.uk
Secondly, Mortgage deposit and
other costs
You’re going to need money in
order to pay the deposit on your mortgage. The average mortgage lender will
request that you are able to make a minimum down payment of 10% of the price of
the property you are seeking to purchase. This is called your deposit. You’re
required to make a deposit payment to give the bank a buffer against potential
fluctuations in the market price of your property. You may get a better rate by
having a larger deposit. There are also some lenders who may lend you money
with only a 5% deposit. As a rule though, the best rates are available for
those with a bigger deposit.
It is important to note that it’s
illegal to use borrowed money to make a deposit payment on a mortgage. It must
either be your own money or it must have been gifted to you. If the funds are
coming from a third party as a gift (parents, spouse or a friend) then you must
be able to provide proof that this money is a gift, and that the sender does not
expect the money to be returned at a later date. The proof is usually given in
the form of a signed letter from the sender, confirming that the money has been
gifted rather than lent.
You may also need to pay Stamp
Duty depending on the value of the house you are looking at. For more information
check out the government’s own website https://www.gov.uk/stamp-duty-land-tax
You will also have to pay solicitors
fees. All house sales and purchases have to be handled by a conveyancer. They make
sure that everything is legal and that the property is allowed to be sold. If
you are looking for details of local solicitors please speak to one of our sales
advisors.
Now, Set yourself some goals.
Amount. You need to calculate how
much deposit you need to save. In order to do this, you’ll need to research
prices in the area you’d like to live to give yourself an idea of the amount of
money you will need to save for a deposit. Don’t forget that you’ll need to
stay within your maximum borrowing limit. It’s never a good idea to look too
hard, you don’t want to fall in love with a property before you’re ready to
buy. You’ll only set yourself up for disappointment.
Date. Once you’ve set a monetary
goal, it’s time to set a date by which you should achieve that goal. If you
don’t set a specific date then it becomes too easy to break your monthly saving
objectives. Your date should be realistic so that your monthly saving target is
achievable. This will give you the best chance of success.
Here’s an example: let’s assume
you’ve seen a new build development that’s offering 2 bedroom semi-detached
homes for £250,000. You’ve decided you want to be able to buy something like
this in the future. Here’s how you break down your saving target:
Minimum Deposit of 10% £25,000
Total Deposit ÷ 36 months £694 per month
However, it’s important to
remember that the price of your chosen property will probably increase by the
time you are ready to buy, so you’ll need to accommodate for this. Whatever
your monthly saving figure comes to, you should add an extra 10% as a safety
net.
£694 + 10% safety net £69.44 = £764
per month
Deposit saved after 36 months £27,504
If you feel that amount is too
much, work backwards. Figure out how much you can afford each month and divide
that by how much deposit you think you’ll need to work out how long it will
take:
£500 a month = affordable amount
to save
£27,500 divided by £500 a month =
55 months
Therefore it will take 55 months
to save £27,500 at the rate of £500 a month
Time to hit that target. Here’s
how.
50+ months of saving might seem
like a daunting task, but it will be worth it in the long run. Here’s the
golden rule to saving towards a goal. Set your money aside at the start of the
month, NOT at the end. Here are some more top tip to get yourself on track for
home ownership:
Curb your spending
It sounds obvious, but it’s
important to understand exactly what you’re spending your money on. The best
way to find this out is to grab a pen and mini-notepad small enough that you
can take it everywhere you go. You need to keep an expenditure diary and log
every single purchase you make over the course of a month. This includes any
direct debits that automatically debit your bank account. The benefits of being
able to review your spending habits in black and white are amazing. It allows
you to filter through the things you really don’t need to be spending your
money on, like a £4 coffee, or a £20 trip to the cinema. All of these items
seem trivial at the time but as soon as they can be seen mounting up on paper,
they trigger the feeling of guilt, and this is the first step to changing your
spending habits. You should always be thinking about ways to save money. Packed
lunch is a must. You can reduce your daily food bill drastically by preparing
each of your own meals.
Tell some close friends and family
what you’re doing
It’s best not to brag about buying
your first house, but it helps to tell people close to you about your goals.
Your close friends and family can support you through the process of saving
money. It also less likely that they will try and tempt you into social
situations where you may spend money unnecessarily.
You’re ready to buy!
If you’ve stuck to the above plan
for the full duration of your saving plan, you should now be ready to start
looking for property for sale in your area. You can make contact with a dedicated
estate agent to help you with your search. At Loveitts, we are more than happy
to arrange a free property consultation for anyone looking to buy their first
home. We can advise you on Brand New Homes as well as established properties
within your area and budget. Our team can also offer guidance on the rest of
the buying process to make your experience as straightforward as possible.
If you’d like to talk to us about
buying your first home, please get in touch – Coventry.resdidential@loveitts.co.uk
024 7625 8421
Adapted from an article published on https://www.thenewhomesagent.co.uk/getting-your-foot-on-the-property-ladder/