The UK is still a nation of home-buyers. Whilst renting seems to be more popular abroad, here buying your first home is often regarded as a right of passage into true adulthood. But times have changed, and not for the better.
When I was looking for my first home in the late 1980’s you could buy a 2-bed terraced house in a decent state of repair for around £30,000. Nowadays, many cars cost more than that.
Mortgages were easy to take out and savings rates were higher so it was easier to save a deposit. There was plenty of help to buy.
Fast forward 30 years or so and many young people are struggling to get on the property ladder. In fact, it would be fair to say, many acknowledge that this is likely to remain an impossibility and are biting the bullet of high rents and wages which are not increasing with inflation. For lots of young people, the bank of mum and dad is their best hope. Mine certainly helped me with my first deposit, for which I am eternally grateful!
If you are in a position to put down a deposit on your first home, it is likely that you will have made some considerable financial sacrifices along the way. You have probably cut your occasional spending to the bone, eschewing expensive nights out, designer gear and multiple over-priced daily coffees for the dream of collecting the keys to your new home from the estate agent.
Until I bought my first home, a 1-bed flat in Cardiff, I had no idea that there were numerous other costs involved in the buying process. You need a good solicitor to handle the conveyancing (sale and purchase) of a property and to make important checks such as ensuring your home isn’t likely to flood or subside.
Your solicitor will also check planning permission granted near your property in case you suddenly find your des res in the middle of a new housing estate or slap bang next to a motorway junction.
So, not only do you need to budget for a deposit for your home, but you will need to pay your solicitors’ conveyancing fees and the removal people for transporting your property (or van hire).
In addition to all that, if the home you are buying is valued above a certain threshold, you will need to pay Stamp Duty (a form of tax) on top of the cost of the home. Currently, first-time buyers in England or Northern Ireland pay no Stamp Duty on properties worth up to £300,000. For properties costing up to £500,000, you will pay no Stamp Duty on the first £300,000 but you will pay Stamp Duty on the remaining amount, up to £200,000.
In an attempt to help people raise a deposit for their first home, the Government has created the Help To Buy Scheme which is explained in the infographic at the end of this post.
If you take out a Help To Buy ISA, (a form of tax free saving scheme) by depositing £1,200 to open it and by paying £200 a month thereafter the Government will boost your saving by 25% (with a maximum bonus of £3,000) when you come to apply for a mortgage.
You can take out a Help To Buy ISA up until 30 November 2019 and carry on saving for 10 years, until 30 November 2029. An ISA is not a short-term savings scheme.
Whilst you may take the view that the potential bonus is unlikely to see you living in a country idyll, when it comes to buying your first property, doing whatever you can to amass that deposit is key.
If the property you have your eye on is reasonably priced – and if it’s attainable for first time buyers then the price is likely to be on the low side – there will be lots of competition. Whoever makes the most attractive offer will win the property and the bigger the deposit the better.
A larger deposit ultimately means you will need to take out a lower mortgage, and therefore your monthly repayments will be correspondingly lower too. That can make all the difference in how much you offer for the property.
Don’t forget you will need to take into account council tax rates, water rates and the cost to heat and light your property too – as well as home insurance on both the building and the contents.
You want to be in a position where your mortgage is quickly sorted out and you can make the most attractive offer for the estate agents to relay to the current owner.
If I had to advise prospective first-time buyers from my own experience, I’d say this:-
- Save as much as you can. Obvious I know but anything you can squirrel away will help.
- Accept you may have to comprise. The house you want might not be in the best location – that’s why it’s cheaper.
- Don’t just visit the property during the day. Take a couple of other trips, at night, in the rain, at weekends. Do the neighbours like to have raves on Saturday nights? Is parking outside working hours a nightmare? Do your research.
- Be flexible. Consider buying with someone else. Look at all the housing schemes available to you.
- Get the best solicitor you can afford. There are loads of cheap and cheerful conveyancing deals out there. I know, I used to be the marketing director of a conveyancing law firm. But what you want is the best experience and the most affordable price – find a firm who you are confident will invest their best efforts into your individual transaction.
- Ask all the questions. Particularly when it comes to conveyancing and talking to your bank, building society or broker about taking out a mortgage.
- Research as many help to buy schemes as you can. Contact your local authority or housing association.
- If you’re buying with someone else – get a will. It’s not morbid, it’s common sense.
- Don’t skimp on insurance and when it comes to getting your property surveyed, it’s worth investing in the most in-depth property survey you can afford.
- Ask about planning permission. That beautiful home that backs on to a field? Who owns the field and are the diggers about to move in?
I know for lots of young people the idea of owning their own home seems like a romantic pipe dream but, like anything, if you set homeownership as a firm goal, with target dates and a list of action points, you may well surprise yourself. Help to buy is available if you do your research.
Lastly, there is, of course, no rule that says you have to own a property. You may prefer to rent and spend your disposable income on travelling, nights out and a nice wardrobe. Nothing wrong with that.
There is, though, nothing quite like the moment when you close the door on your new home and think “this is mine!”.
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