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Top 10 Tips for first time buyers

If you’re looking to get on the housing ladder, it isn’t an easy task so what can you do to ensure you are prepared and have the best chance of collecting those keys.

1. Save

As simple as it sounds, the first step to affording a home is to make sure you save as much as you can, keep a close eye on your outgoings and look at where you can make savings. Cut out the takeaways and ditch your unused gym membership and the expensive phone contract, open a bank account and start saving!

Ideally, you should aim to save up to 10% of the proposed purchase price of your home, although in some cases 5% will be enough.  Check out the best savings rates for you at  https://www.moneysupermarket.com/savings/

2. Mortgages

As it’s likely you will need a mortgage to purchase your home, work out how much you can afford to borrow, what you can afford to pay back each month comfortably and research the type of mortgage that will be most suitable for you, for example a fixed rate or variable rate mortgage. You should also consider the likely purchase price of your home and be realistic! Mortgage brokers can assist you with finding the right deal for you but you can do also do your own research fairly easily online with the help of tools such as online calculators.

All banks provide their own online mortgage rate calculators. It’s a good idea to check the rate your bank and building society is offering as they do offer special rates for their own customers. Alternatively its worth checking an independent calculator such as https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator/

3. Credit Rating

It is important you protect your credit rating, there are various websites that enable you to check this and offer advice and guidance on how to improve it. Having a good credit rating can provide you with a wider range of available finance options to purchase your home.
https://www.experian.co.uk/
https://www.equifax.co.uk/
https://www.checkmyfile.com/

4. Consider the Help to Buy Schemes and house buying ISAs available

The Help to Buy scheme is a Government assisted scheme which allows you to purchase a new build property with a low 5% deposit allowing you to get into your dream home faster. The Government lends up to 20% of the value of the home secured by way of a legal charge. If you satisfy the relevant criteria the loan is interest-free for the first five years.

The Help to Buy ISA Scheme has been closed for new accounts from 30 November 2019. As long as you opened a Help to Buy ISA before 30 November 2019, you will be able to continue saving into your account until November 2029.

5. First time buyer stamp duty relief

If you have never owned a property before and are eager to own your first home, subject to satisfying various criteria, you will not have to pay any Stamp Duty Land Tax on completion of your purchase. This can be a huge saving and makes buying a home for the first time that bit more affordable. If the purchase price is less than £125,000 and you own no other property on completion of your purchase, then you will pay no Stamp Duty Land Tax on this. Small savings like this can be important to consider when you are weighing up the affordability of buying a home. You may achieve this by purchasing a smaller property or perhaps a property that needs some work that you can do over time. Check out the Money Advice Service guide to Stamp Duty to ensure you meet the criteria.
https://www.moneyadviceservice.org.uk/en/articles/everything-you-need-to-know-about-stamp-duty

6. Gifted Deposits

A gifted deposit is where part, or all, of your deposit is provided by way of a gift from someone else which may be a family member, friend or partner. This can be a huge help in affording a home as this is money towards a deposit you are not subject to paying back. A higher deposit may also mean access to cheaper mortgage rates. You should note that where monies are coming from third parties additional checks will need to be undertaken by your Conveyancer and it must be disclosed to your mortgage lender.

7. Loans from Family or friends

Maybe a friend or family member wishes to provide you with assistance with the purchase of your property but does not wish for this to be an outright gift. They may consider making a loan to you or perhaps retaining an interest in the property by way of joint ownership or a trust. Again additional checks will need to be undertaken depending on the arrangement and any tax implications also need to be considered. It is important to notify your Conveyancer at the outset of any proposed arrangements.

8. Shared Ownership

Shared Ownership allows you to purchase a share of the property (for example 50%). You will pay rent on the share you do not own to a Housing Association. You can usually purchase further shares in the property by way of “staircasing”, eventually enabling you to own the property outright (subject to any restrictions imposed by the Housing Association). This can be a good first step onto the property ladder. You should ensure however that you are able to afford the rental payments alongside any mortgage payments.
https://www.gov.uk/affordable-home-ownership-schemes/shared-ownership-scheme

9. Right to Buy

If you currently rent your council house and want to move on towards buying a house, you can purchase your council house through a Right to Buy usually at a discounted rate. Here are all the details.
https://www.gov.uk/right-to-buy-buying-your-council-home

10. Joint Ownership

Buying a house with another person means double the contribution towards the deposit, double the income in calculating a mortgage, double the contribution towards mortgage repayments and more. This means hopefully getting on the property ladder can be quicker and more affordable. You may wish to purchase with a partner, family member or friend. You need to understand the implications of whether the purchase is as either ‘joint tenants’ or ‘tenants in common’. This article explains in-depth.
https://www.gov.uk/joint-property-ownership

For further help or assistance speak to our Specialist Residential Conveyancing Team – we are all the help you need.

Jenny Woodruff

Posted:

Jenny Woodruff

Partner

Jenny is a Partner and head of the Residential Conveyancing Team. She has extensive knowledge of the conveyancing process, including: dealing with freehold and leasehold sales & purchases; new build purchases; remortgages; transfers of equity; shared ownership; help to buy transactions & general property advice.