Getting a foot on the property ladder is a milestone that’s getting harder and harder for people, yet despite this, competition for first time buyers is high.
There were 24,500 new first-time buyer mortgages in January 2018, an 11.1% increase on the previous year. So while the average age of buying your first home is increasing (now up to 30 years old), more people than ever are looking to get on the property ladder.
Why are people so keen to buy?
In a world of economic uncertainty, people want security for their future and their family. While you may not be able to trust in stocks, there’s something reassuring about the trust the four walls bring.
Property also typically increases in value, build equity and provides a nest egg for the future. Since 2008, property prices have been on the rise steadily, making them a sound investment.
When you own your own home, your monthly outgoings are predictable and more stable than renting because they’re ideally based on a fixed-rate mortgage. Plus, the interest and property tax portion of your mortgage payment is a tax deduction.
Finally, it’s a question of pride. Homeownership is considered a milestone in the lives of many young people, especially those seeking for validation in a world of uncertainty. It closely ties you to your community and allows you to set down roots.
The cost of buying a house for the first time
The fact of the matter is this: buying a property is expensive.
Can you afford it?
Without financial support from family, many people will spend years saving money in order to buy a house. With the property market in its current state, many potential homeowners are put off buying and stick to renting.
If you want to buy a house you’re going to have to save, save, save!
Unfortunately, there’s no definite answer for the amount of money you’ll need when buying your first house.
Factors that affect how much you need include:
- Your location
- The type of property you want to buy
- The property market at the time you buy
Based on location alone, prospective first-time buyers could expect to spend 13 times their workplace-based annual earnings to purchase a property in London.
That looks a little daunting. So, let’s break down some of these costs.
Stamp duty is a land tax that you’re liable to pay when you purchase land or property.
Buying a property under £300,000? Good news!
If you’re buying a property that costs more, you have to pay it.
You can use a stamp duty calculator to understand exactly how much you might have to pay. But, odds are that you won’t have to pay stamp duty at all. This is because despite a 4.9% increase on property price, the average property in the UK is £225,621.
Mortgage arrangement fees
Choosing a mortgage is an essential part of buying your first home. With many options to choose from, this should be a key aspect of your research. When shopping around, compare all your mortgage quotes to make sure you’re getting the best deal.
We’ll explore mortgages in more detail later. But for now, remember that your lender may charge a fee to arrange and set up your mortgage.
Deposits vary depending on a number of circumstances. A rough guideline is that you’re looking at a minimum of 5% of the property value. According to the Halifax First Time Buyer Review, the average is around 16%. However, in some cases, a property deposit can be as high as 40%.
Other Up-front costs
- Surveyor fees
- Legal fees
- The cost of removals
Just like any big purchase, your home should have buildings insurance. In fact, many lenders won’t offer you a mortgage if you don’t have it. So, before you start thinking about mortgages, you need to think about insurance.
After you’ve received the keys and can confidently call yourself a homeowner, you’re now responsible for maintaining your home. You can’t call the landlord when the boiler breaks!
From council tax to utility bills, owning and running a home costs money, however, since mortgage repayments are often less than rent, many homeowners find their months outgoing decrease after buying.
Top tips for managing your costs
Have your finances in order
The best way to successfully get on the property ladder is to have your finances in order as best you can. Get a good credit record going and clear as much debt as you can before committing to buying your first home.
Leverage existing schemes
Many people struggle to get themselves into a position to consider buying a property. To help get you on the first rung of the property ladder, take advantage of government schemes such as:
- Right to Buy
- Buying through shared ownership
- The Help to Buy Scheme
These schemes are specifically designed to help you, so see if you can make use of them to help make the costs more manageable.
All things considered, can you afford to buy a property?
It’s time to talk about mortgages.
What do you need to buy a house?
The most common way to buy a property is to get a mortgage. Mortgages allow you to buy a property without having to pay everything up front.
Before you start looking for a property, it’s advisable to arrange to have an agreement of your mortgage in principle before you start your search. Knowing how much a mortgage provider will agree to lend you is one of the most important home buying tips.
While nothing is set in stone yet, and there are no guarantees, knowing what you can realistically afford will help you on your house hunt.
To help you decide which mortgage option is right for you, do your homework. Work out the monthly repayments you can afford using a mortgage calculator and speak to experts who can help.
Types of mortgage
As the name suggest, the interest rate is fixed at a certain level for a set period. This period is often two, three or five years, although longer-term fixed rates are available.
During that period your rate is guaranteed not to change. This is what makes fixed rate mortgages so attractive to first time buyers. You know what you’re paying and you have the peace of mind that it won’t change.
When your fixed rate period comes to an end you will usually move on to your lender’s standard variable rate (SVR).
Tracker rate mortgages vary what you pay depending on some other rate, usually the Bank of England base rate. It is a set margin below or above that rate for a set period – for example, 1% above base rate for five years. During that time it moves up and down if the other rate changes.
The interest rate is a set margin below the lender’s SVR for a set period, and during that time it moves up and down as the SVR changes.
When the special offer period ends the interest rate you pay will usually revert to the lender’s SVR. This is a rate which the lender sets itself.
During the special offer period you’ll usually be locked in to the mortgage, and if you want to pay it all off you’ll face early redemption charges – typically a set percentage of the value of your loan.
Remember, your mortgage will be one of the largest loans you ever take out. Choose carefully before committing to your type of mortgage.
Top tips for choosing a mortgage
Before you book an appointment with a mortgage adviser, it pays to shop around. Research the rates and packages available to get a much better idea of what sort of options are available to you. A mortgage adviser can tailor a suitable mortgage for you, but by shopping around, you can be sure you get the best deal.
Be mindful of incentives
Some mortgage options include incentives such as a free valuation, free legal fees, or even a cash rebate on completion. These can help you balance your costs more effectively.
However, it’s important not to be drawn in by freebies. Calculate how much incentives will affect the overall costs, because what you see may not be what you get.
Now you know how much you can afford, it’s time for the fun part…
Choosing your first home
When it comes to choosing your first home, it’s important to know exactly what you want. So, before you start booking house viewings, make a list of what you’re looking for in a new house.
What type of property do you want to live in?
- House or flat?
- New build or old?
What are your requirements?
- Number of bedrooms
- Type of kitchen
- Type of bathroom
- Do you want a garden?
- Are you prepared to renovate?
Once you’ve got an idea of what you want, put everything into a priority order. Depending on your budget, you may be forced to compromise. Knowing what you can live without now will make it easier to make decisions further down the line.
Searching for a property
Online property searches are often the first place people start looking when people want to buy a house in the UK for the first time. But, take care!
Online searches aren’t always kept up to date and you won’t find all the information you need on one property posting. This is why it’s so important to visit a local estate agent too.
You should also seek advice from family and friends who have done all this before. For first time buyers, knowledge is power and speaking to people with experience can help you avoid the pitfalls.
When you’re viewing properties, always remember: This is your money you’re spending!
So, ask lots and lots of questions. Take a list of questions if you have to and find out as much as you can about the property you’re viewing.
Before you settle on a property, make sure you’re 100% satisfied with it. If you’re unsure, ask more questions.
When viewing properties, be thorough. Try and visit the property more than once, at different times of the day. Take your time exploring every room and fixture. To get a good idea of the neighbourhood, do a drive by or two.
When viewing a property for the first time, it can be helpful to bring someone with you. Ideally, take someone with experience in property viewing.
A second opinion is very helpful when viewing property. They might notice something you’d miss, plus you can bounce ideas off them.
10 Questions to Ask When Viewing a Property
- Which way does the house face?
- Have there been any major works done?
- What’s included in the sale?
- Is the property listed?
- How long have the owners lived there?
- Why is the owner selling?
- Are there any issues in the chain?
- Have the sellers found their next property?
- How long has the property been on the market?
- Has there been much interest in the property?
What to check when buying a house
With so much to consider, it helps to break it down. The best way to buy your first house is to be thorough. So, as well as questions you want to ask, make a list of everything you need to check. This could include:
- Doors & windows
- Light fittings
- Plastering & carpets
- Property structure
- EPC rating
- Property boundaries
Other things to consider
You know the saying: “Location, location, location!”
Where you live can be just as important as the property itself. When doing a drive by, try to imagine what it would be like living in the neighbourhood. Consider the people, whether the area is run down and check out the reported crime statistics.
Also check any potential construction planning in the area. That attractive copse of trees just outside your window might become another housing estate in 2 years!
Just like the property itself, it pays to do research on the local area.
How important is it for you to be located near your job? Can you easily get to the shops, visit family, go to the gym etc.?
When looking at transport links, remember that everything has a cost. Living in a well-connected area with many transport links can result in higher house prices. This is why it’s important to be able to prioritise your needs and be flexible with your requirements.
How important is it for you to be close to local shops, bars and restaurants? Do you want to be in the centre of town, or away from the hustle and bustle? Will you be near to everything you need?
The more you know about your new community, the better.
Top tips for viewing properties
Look outside the property
Can you see yourself living there and making it your home? Is there damage to the roof or guttering? Remember, you’ll own all the property, not just the inside!
You’re likely to get more out of the seller, or the agent, if you’re friendly. Being on good terms with all parties will make the whole process much smoother.
Congratulations! You’ve found your dream home!
Let’s turn that dream into reality…
Buying your first property
The first step in securing your dream property is to make an offer. Once it’s accepted, you can instruct solicitors and get the conveyancing done. This is often a cause of stress and uncertainty for many first time buyers. Sorting out the paperwork can take months and anything can happen during that time. Your offer could be gazumped, or the conveyancing could reveal something unexpected.
Fortunately, we will guide you through this tricky process and help you secure your first property.
Making an offer
The secret to making a good offer is to be crystal clear. Always put your offer in writing and be clear as to exactly how much you’re willing to pay. When making your offer, you should also include any conditions you’d like to make, such as the inclusion of any fittings or upon agreed work being completed.
When negotiating your position, remember this golden rule: Knowledge is power.
Finding out as much as you can about the property will give you tools you can use to leverage your bargaining position. Negative factors, such as a poor EPC rating or significant wear and tear to the property, can help you argue a case for a lower price.
If the price is high, you could suggest that any works that need to be done are undertaken by the seller ahead of completion. Or, you could ask for the property to include certain fixtures.
Some sellers will try to get you to increase your offer by throwing in white goods. Try not to be overly influenced by this. Unless they’re almost brand new, within warranty and have guarantees that are transferrable, white goods tend to be worth very little.
As a general rule, most buyers start negotiations from 10% less than the asking price.
Be prepared to be rejected at first. If the property hasn’t been on the market for very long, the seller is likely to leave you hanging in case a better offer comes along.
One of the common problems first time buyers find when negotiating property is what to do when you get gazumped.
Under the current system, gazumping is perfectly legal. Sellers naturally want to get the highest possible price for their property, leaving buyers at a disadvantage.
There are a few ways you can combat gazumping. Firstly, when making your offer, make it clear that the offer is subject to the property being taken off the market. Secondly, if you get on good terms with the seller, they are less likely to go for another offer. Speak to the seller regularly and do everything you can to show them that you’re serious about your purchase.
You can also protect yourself by taking out home buyer insurance, which will indemnify you if the deal falls through.
But, the most secure way to seal the deal, is to use Gazeal. Our legally binding agreements lock both parties into the offer. This means buyers can’t be gazumped and sellers are guaranteed their offer. It’s the best way to secure a property sale for everyone involved.
Find out more about Gazeal.
If all goes well, your offer will be accepted! But the work doesn’t stop there. Once accepted, you need to undertake the complex process of legal transfer of ownership. Fortunately, you don’t have to do this. All you have to do is instruct a solicitor.
You should instruct a solicitor as quickly as possible. Just like every other aspect of this process, it pays to shop around when choosing solicitors. Read reviews, speak to people and have a thorough understanding of the fees involved.
Sometimes, your mortgage lender will recommend one of their panel of solicitors. This is always worth looking into, because they can act for both you and your lender.
Thanks to modern technology, you don’t have to rely on local solicitors. Solicitors in Cardiff are able to act on your behalf even if you’re buying a property in Land’s End and you live in Glasgow.
Why do I need a solicitor?
In order to buy a property, you need to make sure that the legal transfer of home ownership is done correctly. This involves drafting contracts and undertaking property searches and is the job of a conveyancer. However, there are other aspects of buying a property that may fall outside the remit of a conveyancer. This is why instructing a solicitor is advisable. They can cover all aspects of the legal process, including conveyancing.
When all the surveys and searches have been performed, it’s time to sign and exchange contracts. You and the seller will agree on a date and time to exchange and at the appointed time, your solicitor will exchange contracts for you.
If you’re in a housing chain your solicitor will perform the exchange, but will only release it if the other people in the chain are all happy to go ahead. This means if one person pulls out or delays, everyone in the chain gets held up.
Once you have exchanged contracts you’ll be in a legally binding contract to buy the property with a fixed date for moving. This means that:
- If you do not complete the purchase, you will lose your deposit and owe the seller more if the deposit was less than 10%
- The seller has to sell or you can sue them
While timings vary widely, the exchange process can take up to 6 months to complete. Using Gazeal, this can be cut down to a matter of weeks, because most of the work is done up front before you’ve even made your offer.
This is the most exciting day for first time buyers. Completion day is when you get your keys! Usually, it takes 2 or 3 weeks after exchange for completion to take place but, sometimes, you can exchange and complete on the same day.
After completion, your solicitor will tie up the loose ends for you and issue you their final bill. Once this is paid, you’re all done. You’ve bought your first property!
Top tips for exchanging property
Always remember, regardless of the market or the property, you can only afford what you can afford. When you make your offer, don’t put yourself in financial difficulty simply because you got caught up in the negotiations.
If you’re unsure about something, ask. Your solicitor is your legal expert. You’re paying for their expertise. All too often people can feel intimidated when dealing with solicitors, but you shouldn’t. Most lawyers welcome questions if there’s something you’re unsure of or worried about.
After years of renting, all the scrimping and saving, and the stresses of the buying process, only one step remains…
To help ensure a smooth house move, it pays to ask the people who know your new property best… the previous owners. They can tell you lots of useful things including:
- The location of the stopcock, gas and electricity meters, fuse box and thermostat
- The company that supplies the energy, broadband and home phone
- The day the bins are collected
- Whether any surfaces need special cleaning products
- Where the kitchen and bathroom tiles, and cabinets come from
These sorts of questions are seldom thought about when you’re sorting out the legal side of things. But, knowing these things can help take the hassle out of those first few busy days.
5 tips for a hassle-free move
- Plan your move. How big a van will you need? Are you doing everything in one trip or going back and forth?
- Label your boxes with which room they’re due to go to and load them in the van grouped together.
- Call in the help! Moving house is hard work for anyone, so call in some favours and get your friends and family to help.
- Move your furniture into your new property first. This will save you from having to manoeuvre around boxes.
- Make an important info folder to keep all your vital paperwork together during the move.
Other things to remember include redirecting your post and registering to vote. Now you’re a home owner, the journey isn’t over… it’s only just begun!
Top tips for moving house
Pack a “moving box”
A moving box contains a kettle, tea (or coffee), biscuits, cups, spoons and milk… everything you need to refresh your moving team. This box should also include rubbish bags so you can keep everything clean and organised.
Don’t lose them!