Buying your first home is one of the most exciting, exhilarating decisions and journeys you can take in life. We tend to think of bucket list entries as visits to exotic locations, skydiving, or meeting celebrities, but that is perhaps only because the real lifetime ‘musts’ such as having a child or getting a mortgage have been accomplished earlier in life.
Going From Renting To Buying
Let’s assume that you’ve reached that point where you’re ready to finally buy a home. The usual route in life is from renting to buying, and there is actually little financial difference in the month-to-month expenditure between the two once the house has been purchased.
From the moment you decide to purchase you must become brutal with your money discipline to make sure that you are ready to buy. Your credit history must be spotless, with no late payment of bills or violation of your limits. Any borrowing must be paid on time, and overpaid if possible to drive overall debts down. Unless some dramatic changes are made to the entire structure of borrowing and a new approach is taken to the housing crisis, only those who have good records will even stand a chance.
The trick is to maintain your finances while still putting enough aside to build an impressive deposit. The key number for mortgage seekers is the Loan to Value percentage (LTV), which describes how much of the mortgage will be loaned out by the lender. The lower the LTV and hence the lower the amount contributed by the lender, the better the interest rate one may receive.
How Much Can You Afford
It’s worth getting at least an idea of how much you may be able to afford before setting your heart on a house. Be realistic in your searches. City AM reported that the average first time buyer is paying £166,393 with an average deposit of £32,518, representing a rise of £138 a day from the year before. To many young people these are horrific figures, and could represent crushing disappointment. This article may help with assessing what you can afford.
So the advice is to be realistic, plan early, and try not to be too prescriptive when searching for options. Excluding an affordable home purely because there is no parking or because it is terraced is likely to screen out homes that actually could be ideal. That five-bedroom detached home might have to wait, but it will definitely be more achievable down the line once you’ve got some equity in the first home.
Remember Those Additional Costs
Underestimating the additional costs associated with buying a home is one of the most common mistakes made by the rookie. According to recent research the average move costs £5,000 more than the participants expected in 40% of cases; even renters overpaid by more than £3,000. We tend to see the headline figure of the cost of the home and ignore budgeting for the costs of estate agents, conveyancing, surveys, valuations and the other additional elements that make the process run smoothly.
The more you’re prepared and organised, the better the overall process should go. Know that you could be stressed and worried at times, and impatient and frustrated at others. Many brokers now issue each buyer with a portal allowing them to submit forms and costs electronically, and follow the process online.
For your part, keep tabs on this portal while also compiling a checklist of things that need to be done by you, and people/companies who need to be contacted, such as utility providers etc. it’s not easy but it is rewarding, and by the end you’ll be able to utter those magic words: “I own a home”.