Chancellor Rishi Sunak recently announced a new 5% deposit mortgage guarantee scheme, which is great news for first time buyers who are now able to borrow mortgages of up to 95% of the property purchase price! There has been a shortage of 5% deposit mortgages since the start of Coronavirus so these news are welcome by sellers and buyers alike.
To celebrate these news, we’re bringing you a property guide for first time buyers with everything you need to know about buying your first home.
When is a good time to buy?
The deposit scheme launches in April 2021 which means many lenders will start offering 95% mortgages again, and there are other schemes in place to help you get on the property ladder like low interest rates. Although house prices have been slowly rising in the past year, especially in rural areas, now might be a good time to get yourself on the property ladder to take advantage of the low interest and property schemes available to you.
You will need to work out how much you will be able to afford when you’re ready to buy your home – this requires digging deep into your finances and calculating the right amount. We advise you set up a simple spreadsheet to calculate your income, expenses, savings, and how much you can top your savings up with. You will also need to be realistic about monthly mortgage repayments.
You’ll need to find a 5% deposit for your property, think about moving costs, any repair and renovation costs, and have a safety net should anything like a boiler break. Remember if you can, put down a bigger deposit which means your monthly repayments will be lower.
It is also advisable to think about the future when it comes to monthly payments – what happens if you lose your job, if interest rates go up, or if you are simply unable to work? We would advise you to start a savings account where you are able to put away some money – just in case you ever need it for your home.
What else do I need to think of when it comes to costs of buying a house?
Alongside your deposit, you will need to consider other costs such as:
- The solicitor’s fees
- Property survey costs
- Mortgage arrangement cost
- Costs of moving like hiring a van
- Property amends and decorating
- Home insurance
- If your property costs more than £300,000, you will need to pay Stamp Duty
How do I choose the right mortgage?
You will need to choose a mortgage depending on your personal situation – thee are two types of mortgages available:
- Interest-only mortgage means you only pay the interest of the loan every single month – BUT you will have to pay off the original sum at the end of your agreement
- Repayment mortgage means you make monthly payments to reduce the total loan amount which equals to the original amount you borrowed plus interest. This is the most common type of mortgage.
You can then choose different mortgage interest types:
- Fixed-rate means your interest rate will remain the same for an agreed period of time
- Variable-rate means the interest can change depending on economic circumstances – your bank can either raise or lower your interest rates
- Tracker interest rates can also change, but the rate is based on ‘tracking’ another interest rate such as Bank of England base rate
How do I find the right home for me?
Your first home is likely to be the place you live in for many years after purchase, so do your research and really think about where you want to live. Some research you might want to do is:
- Is the area up and coming?
- What facilities are available locally?
- What is the community like?
- What are the crime rates?
- What future plans are in place for the area?
- Is there a bus route or a train station?
- Could you start a family in this area?
- Does the property need to have a home office space?
- Is there plenty of outdoor space, or is the property near a park?
You can make a list of your property and area non negotiable’s and start the search – use the Houso search tool to narrow down your search and find a list of suitable homes.
What are the right questions to ask at a viewing?
Research the area and the property before a viewing so you have a good idea of the home before you even step through the door. You might even decide that the area is not right for you, or there is a deal breaker hiding – save yourself the trip if that is the case.
Some questions you might want to ask are:
- Why are the owners selling?
- How long have they lived in this house?
- How much are the bills?
- What fixtures and fittings come with the house?
- What is the local area like?
- Are there good restaurants, pubs, schools, and a doctors surgery/dentist near by?
- What are the neighbours like?
- Where are good places to walk?
Take the time to look at all the rooms, as well as the exterior of the property to spot any signs of dampness, loose tiles, damages – you want to ensure the property was well looked after.
How do I make an offer on a property I like?
You have found the one – and ready to make an offer. How can you do this confidently and make sure it gets accepted? Talk to your estate agent about the position of the seller – how long has the property been on the market, and how quickly do the sellers need to move? These will give you a good indication of whether you can make a lower offer and have this accepted, or if the sellers have the time to find a buyer who will put in a higher offer.
Remember you have the advantage of being a first time buyer and you can move quickly – you can also get a pre-arranged mortgage, which will put you in an even better position. Having the safety of a first time buyer with an agreed mortgage is very attractive to sellers!
Sound confident, and if you are making a lower offer then explain why – have you done your research and found properties of a similar type in that area are priced lower? Is there something about the house that will need fixing therefore you would like to negotiate? The more research you do to back up your offer, the more likely it will be accepted.