Buying your first home is a significant milestone, one that can come with a mix of excitement and apprehension, especially when it comes to the financial side of things.
Here’s a look at the top five problems faced by first-time buyers and how to navigate them effectively:
Problem 1: High Property Prices
Problem: The UK, has some of the highest property prices in the world. This makes entering the market particularly challenging for first-time buyers who may struggle to save enough for a substantial deposit.
Solution:
- Help to Buy: The government’s Lifetime ISA (LISA) scheme, touted as the successor to the Help to Buy ISA, has gone on to become a popular alternative to the Help to Buy version. With a LISA you can pay up to £4,000 per year to serve as a mortgage deposit and the government will add a bonus of 25% to these funds at the end of the tax year.
- Shared Ownership: This scheme allows you to buy a share of a property (between 25% and 75%) and pay rent on the remainder. Over time, you can buy bigger shares when you can afford to, so your ownership of the property becomes greater.
- Consider Relocating: If you’re not tied down to a particular location, consider areas where property prices are more affordable – even widening your search radius by just 5 miles can make a difference. Consider regeneration projects, often, these areas offer good potential for price growth.
Problem 2: Stringent Mortgage Requirements
Problem: Mortgage lenders have become more cautious, setting stricter criteria for applicants.
Solution:
- Save a Bigger Deposit: The larger your deposit (you need to aim for a minimum of 5%, however the more deposit you have the better), the lower the risk for the lender, which may make them more willing to approve your application. Plus, the higher your deposit, the lower the interest rate you may get on your mortgage.
- Mortgage Brokers: Consider working with a mortgage broker/advisor. They have knowledge of the market and can advise on lenders more likely to accept your application.
- Improve Your Credit Score: Always pay your bills on time, avoid maxing out credit cards, and periodically check your credit report for any discrepancies.
For more ways to increase your credit score, click here.
Problem 3: Underestimating Total Costs
Problem: Many first-time buyers focus on the deposit and monthly mortgage repayments but overlook the other costs associated with buying a home.
Solution:
- Budget for Extra Costs: Remember to factor in stamp duty, survey costs, solicitor’s fees, and removal costs. It’s advisable to keep a contingency fund too.
- Seek Expert Advice: Confer with a financial adviser or mortgage broker to get a clear picture of all potential costs.
- Emergency Fund: Beyond home-related expenses, it’s wise to have 3-6 months of living expenses saved up in case of unforeseen circumstances like job loss or unforeseen issues with your new home.
Click here for your comprehensive guide of understanding the cost involved when buying a property.
Problem 4: Limited Knowledge of the Buying Process
Problem: The property buying process in the UK is intricate and can be confusing for those unfamiliar with it.
Solution:
- Speak to a Financial Advisor: Get your Agreement in Principle (AIP) in place first, as it will indicate how much you may be able to borrow and will also help you when approaching estate agents about properties you may be interested in viewing and offering on.
- Make Friends with your Estate Agent: Your estate agent should become your best friend during the house-buying process. They know everything there is to know about buying houses and getting them through to a successful completion. They can guide you through the entire process and will keep you informed about properties that suit your needs and budget.
- Hire a Conveyancer or Solicitor: These professionals guide you through the legal process, ensuring everything goes smoothly.
- Research: The internet is a treasure trove of information. Websites like the Money Advice Service and Citizens Advice offer free, impartial advice to first-time buyers.
Problem 5: Emotional Decisions
Problem: Buying a home is as much an emotional decision as a financial one. First-time buyers sometimes make decisions based on emotions, leading to costly mistakes.
Solution:
- Take Your Time: Don’t rush into buying. Take the time to visit multiple properties, and revisit your favourites at different times of the day or week.
- Stay Objective: Prepare a checklist of essential features you want in your home. This can help you stay focused on what’s necessary and what’s merely a ‘nice-to-have.’
- Seek a Second Opinion: Bring along a trusted friend or family member during viewings. They might offer a more objective perspective.
In conclusion, while the journey to owning your first home might come with its challenges, equipped with the right knowledge and resources, you can navigate this path effectively. Remember, it’s about making informed decisions and seeking help when needed.
Embrace the adventure, lean on professionals for guidance, and before you know it, you’ll be holding the keys to your new home.
If you’d like help with your mortgage or protection products available, contact one of our friendly advisors who would be happy to have a chat and help guide you through it all.