You’ve been saving a deposit, looking at 5-beds on RightMove when you should be working and you’re obsessed with the idea of owning your own home. We know how it is when you’ve got the home-buying bug. Before going ahead and making one of the biggest money moves of your life, here are 7 things to think about.
1. Can you afford it?
When buying a home, it can be tempting to take out as large a loan as possible. If your bank offers to lend you £200,000, how likely are you to ask for half of that?
Lenders have a responsibility to only give mortgages to those who can afford the repayments but some people still end up taking on too much debt to buy a home.
Before signing any documents, ask yourself whether you could afford the repayments if your financial circumstances were to change. For example, what would you do if you were to lose your job? If you have a solid emergency fund, this can be a lifesaver. If you’re using your emergency fund for your deposit, this could cause problems later. There’s also the uncertainty of what will happen to the housing market as the COVID-19 pandemic rages on and inflation continues to drive up prices. According to the Office of National Statistics, the average house price in the UK was at a record high of £270,000 in September 2021. That is £28,000 higher than in 2020.
Draw up a rough budget outlining how your finances will change once you’re in your new home. How much money will you need for mortgage repayments, bills, food costs and day-to-day expenses? If you’re buying a flat, you might also have to pay service charges and ground rent. New build houses sometimes have the same fees, though this can vary depending on the developer. If the numbers seem too complicated to calculate on your own, download our dedicated Budgeter to help you do the maths.
2. Have you organised your paperwork?
Did you know that when applying for a mortgage, lenders will usually want to see bank statements, payslips and proof of addresses for anywhere between 3 months to 3 years?
Instead of leaving it all until the last minute and digging through a messy drawer of paperwork on the morning of an appointment with your bank, get organised ASAP.
Pour yourself a drink, put on your favourite tunes and make an evening of getting all your paperwork in order. By organising everything into folders and colour coding different documents, you can make things easier for your future self.
3. Can you get a better mortgage?
As tempting as it might be to walk into your bank and ask for a mortgage, this could see you missing out on the best deals.
Instead, get in touch with a mortgage broker. Some brokers charge a fee for their services but others are free. They’ll take a look at your income, savings and credit rating before comparing hundreds of mortgage products from a wide selection of lenders. Using a mortgage broker could help you keep your mortgage repayments low and save you thousands of pounds.
A mortgage broker can be particularly helpful if you’re buying a home with a small deposit, unpredictable income or imperfect credit rating because they’ll know which lenders are most likely to approve your application.
4. Have you budgeted for fees and tax?
Frustratingly, a deposit isn’t the only thing you need to save up for when buying your first home. You’ll also have to prepare for a series of other costs such as the following:
Stamp Duty Land Tax - This is a tax paid when purchasing a property. Most first time buyers won’t pay any SDLT at all but it’s worth double-checking on gov.uk before you start the process.
Valuation fee - When buying a home, your lender will usually carry out a valuation to assess the value of the property. Not all lenders charge a fee for this but those that do, tend to charge around £300-£400.
Surveyors fee - While lenders will carry out a valuation, you may also choose to get your own independent survey. A survey will assess the condition of the property so you can be sure you’re getting what you’re paying for. Surveys can cost between £400 to £1,000 but can save you more money in the long run.
Conveyancing fee - You’ll need to hire a conveyancer to carry out the legal process. This can cost you anywhere between £800 to £2,000. Before choosing a conveyancer, ask them for a cost breakdown.
The list above isn’t exhaustive and there may be other costs such as mortgage broker fees and arrangement fees. Don’t forget removal services and new furniture!
5. Are you happy to live there for 5 years or more?
Making your first steps onto the property ladder can be so challenging that many first time buyers settle for homes they’re not entirely happy with. Before buying your home, ask yourself whether you’re happy to live there for 5 years or more. Moving house can be so expensive that you might end up living in your first home much longer than you planned.
6. Are you overlooking any red flags?
In some cases, it may be wise to cross that particular home off your list but many issues can be resolved. Speak to your estate agent to find out if a lower price can be negotiated and have a chat with your solicitor for advice too.
7. Don’t forget to daydream
Buying a home can involve so much paperwork and admin that it’s easy to forget what you’re working towards. Give yourself a break from all the serious stuff by doing plenty of daydreaming and decor planning. Follow home accounts on Instagram, pin beautiful kitchens to a Pinterest board and collect fabric samples from your favourite furniture stores. Buying your first home is something you’ll never forget. Try to savour each moment and have a good time!
So, before you dive into the infinity pool that is the housing market consider the above 7 tips! Approaching your property purchasing journey the right way can save you a whole lot of time, tears and money.