Posted on 21.6.16 by Samantha Eaton
Getting on the housing market is tricky business these days. There have been a great number of reasons why first-time buyers in particular are struggling to get on the ladder, reasons such as higher cost of living, disparity between wage and house prices, a problem with supply and higher rental costs pre-buying meaning it is more difficult to save up the deposit.
Despite such negatives it is not impossible. It’s also vital for the property market in general as first-time buyers are seen as the ‘producer’ in the food chain, which helps the rest of the ladder, i.e. second and third time buyers, to move on. In this article we are going to explain why it is possible and lend some top tips for first-time buyers.
Why it is possible to get on the property ladder
- Bigger scope for mortgage lending
There is now more choice for those who are looking to borrow a higher percentage of their home’s value; this is good news for first time buyers (FTBs) as it means the deposit they have to save isn’t a big. Historically, a 95% loan to value mortgage would only be available to certain local areas or for those with a guarantor if things went pear-shaped. Saving a 5% deposit, which would be £7,500 for a house worth £150,000 is entirely feasible. It does get a little more troublesome for those living in London and the South-East where house prices are closer to £300,000 for FTBs. However, with two people saving up it is still possible.
The number of 95% mortgage products have soared five-fold since the introduction of the Help to Buy scheme in 2013, which is great news as it means that the competition is there to search around and get a good rate.
- Help to Buy is still alive and kicking
The latest introduction to this scheme has been the Help to Buy ISA which was unveiled in December 2015. If you buy a house for under £450,000 in London or less than £250,000 in the rest of England then you will be entitled to a 25% bonus on your savings up to £3,000. The good thing with this is that if you are buying with another person, you can both open a Help to Buy ISA and claim the bonus. The catch for some FTBs is that if your property is worth more than the figures mentioned above, your bonus won’t get paid.
The other two schemes under this umbrella are the Help to Buy Mortgage Guarantee Scheme and the Help to Buy Equity Loan Scheme. According to figures, more than 150,000 people had utilised these schemes.
Getting that all important deposit saved up is often FTBs greatest challenge. Some prospective buyers are stuck in what’s being called a ‘rental trap’ but determined saving is the absolute key; you need to be serious and you may have to sacrifice a few luxuries in the meantime to achieve your goal. Below are a few top tips from our Residential Property team to help you work out your finances and save up:
- Work out a reasonable budget: Look at your finances and work out exactly how much you can afford to invest into a new property. You will need to work in the overall expense of furnishing a new house, making repairs to an older building, redecorating etc. Importantly, factor in the stamp duty and conveyancing fees plus the other ‘usual’ bills – utility, council tax, TV licence.
- Find out how much you can borrow: This will rely on a number of elements, such as your income, out-goings, credit score and the size of your deposit. Have a goal in mind before you visit a mortgage provider. Getting the right advice now will help you out in the future when you are looking at properties.
- Choosing a conveyancing solicitor: Once your offer is accepted, or even before, you then need to start considering the conveyancing process, and nominate somebody to handle and prepare all of the legal documents to transfer the home into your name; an important part of the whole process.
This practice, which comes between agreeing to purchase the property, and actually moving in, can take from a few weeks to several months to complete. For this reason it’s very important to ensure that you stay in touch with your solicitor and reply to all correspondence within good time to move things along as quickly as possible.
Contact our Residential Property team today on 0161 930 5151 for a free quote for buying or selling a property. You can also send in your enquiry via the online contact form and we will get back in touch with your quote.