TIPS FOR FIRST TIME BUYERS
For those with a long period of renting behind them, finally being in a good enough position to buy a property is a dream scenario.
But it’s also a huge step and one that shouldn’t be entered into lightly, particularly in London where the kind of figures associated with buying a home can stretch into seven figures.
Becoming a homeowner, though, gives you the best opportunity to build a sound financial future for yourself and your family.
So, how can you ensure the process is not as scary and daunting as everyone tells you it is?
We have a wealth of experience in the London property market here at Ellis & Co, so follow our top six tips for buying a property for the first time.
WHICH IS BETTER? BUYING OR RENTING?
Renting a property brings with it a unique set of advantages, the main one being flexibility to move quickly and knowing big problems like boiler failures will be sorted and the cost of repairs covered by your landlord.
But we all dream of owning our own home and being able to buy a property places you in control of your financial future, not to mention having a place you can genuinely call ‘home’.
Renting is often referred to as ‘paying off someone else’s mortgage’ and this is technically true. You aren’t building up profit from property if you are renting someone else’s bricks and mortar.
Buying a home means you are paying your way towards owning that property outright, while also, in a buoyant market at least, gaining profit as you go along.
Finally, mortgage payments are often cheaper than monthly rent so you could end up having more of your monthly wage to either save or spend on other things.
TIP ONE: SAVE AS MUCH AS YOU CAN
Without a deposit, you are no closer to buying your own home. But if you’re in a position to buy then there’s a very good chance you have at least a 5% deposit to put down on your first home.
However, in the long run it pays to save as much of a deposit as you can. The bigger your deposit, the smaller your mortgage and mortgage payments will be.
Moreover, if you can pay up a 15% or 20% deposit, the rates on offer from lenders will be far more attractive.
To put some numbers into the explanation, if you are buying a £450,000 flat in Finchley, the average price of a property of that type in the area, then a 20% deposit would mean you contributing £90,000.
TIP TWO: DON'T FORGET THE OTHER COSTS
Buying a first home in London is never going to be a cheap affair. Not only are property prices more expensive than anywhere else in the UK, but there are a host of other costs you’ll need to factor in before buying.
This is important: Make sure you include all your costs when working out your budget. It will prepare you for what you are facing and may mean you need to re-evaluate your aims.
- Stamp Duty: First-time buyers currently pay 0% Stamp Duty on the first £300,000 of properties worth up to £500,000.
- Survey costs: This largely depends on the type of survey you are having. Ellis & Co always advises buyers to have a survey on the property they are purchasing, which can cost between £150 and £1,500 depending on the property’s size and the type of survey required.
- Solicitor’s fees: These can cost anywhere between £850 and £1,500, plus VAT, and the solicitor will pay themselves the fee on completion of your purchase.
- Removal costs: Unless you are planning to move your things yourself, the average cost of hiring a removal company to do it for you comes in at around £600 for a two-bedroom flat. This can increase to around £900 for a three-bedroom house, while packing charges can be around £250-£300 on top of that if you wish the company to pack your things as well.
- Mortgage arrangement and valuation costs: Even though these can be added to the mortgage loan in many cases, the cost can vary depending on the lender.
- Other costs: Don’t forget to work in other costs such as new furnishings and decorating. And don’t neglect buildings and contents insurance – you didn’t spend all that money buying your first home to then not bother protecting it against damage or theft of contents.
TIP THREE: BE SURE YOU CAN AFFORD TO PAY THE MORTGAGE
It’s important to remember that buying a home is one of, if the biggest, financial investment you will make in your life.
Do not overstretch yourself. Work out if you can afford the mortgage payments before you apply for the loan. Consider if your circumstances change or if interest rates rise – would you still be able to make the payments?
Mortgage companies will undertake a ‘stress test’ such as this when assessing your application so being sure you will pass before applying can help keep things on track.
TIP THREE: BE SURE THE PROPERTY IS A GOOD BUY
When you get to the stage of viewing properties that could potentially make your first home, be prepared to check each home out as if you were performing an MOT on a car.
You’re making a huge investment and taking on a big mortgage so you need to be sure that the property is sound – and that’s never easy as first-time buyers tend to view with the heart more than the head.
Here are some key things to keep an eye out for when viewing properties:
- Cracks in the walls or ceiling
- Missing tiles on the roof
- Noisy neighbours
- Aging electrics
- Rotten wood windows
- Bad water pressure
As a first-time buyer, it can be a good idea to take a more experience friend or member of the family around on viewings with you, or a person with a trade if you know someone and trust them. They could spot things you miss or be able to provide crucial advice when you need it.
TIP FIVE: GO BACK IN THE EVENING
Most property viewings take place during the day – when most people are at work and the area around the property will generally be quieter.
Before taking the plunge on an offer, visit the property again later in the day when everyone is home from the office.
It will give you a true perspective on the area and the people who live in it before you make a decision.
TIP SIX: DON'T GO ABOVE YOUR BUDGET
As we said in tip two, it is important to set yourself a budget containing all costs before you set out on your first-time buyer journey.
House hunting is an emotional process and if you fall in love with a property, the chances are someone else has, or will, as well.
This is where strength comes in. Don’t be tempted to blow your budget in a bid to beat off the competition.
If someone else is in a better position to buy that particular home, try to accept it and move on with your budget intact.
Always be sensible and seek advice from people your trust. Your local branch of Ellis & Co can offer help and advice on the current position of the market in the area you are looking to buy in.
If you have any questions about buying your first property, you can contact your local Ellis & Co branch who will be happy to help.