An established high street bank recently announced that a massive 61 per cent of so-called ‘second steppers’ – first-time home owners looking to move up the property ladder –were finding that second purchase even more challenging than the initial one. This news makes that first step into the world of property all the more crucial as your stay there is likely to be longer than previously expected.
Here are our top ten tips for first-time buyers to ensure you make a prudent decision:
1. Would renting be more cost-effective?
Even with a substantial deposit, a mortgage is going to be a necessity. In places such as Scotland, London and other parts of the South East house prices are rising at such a rate that even with a twenty per cent deposit mortgage repayments are considerably higher than the corresponding rent. Make sure that buying a property is the right thing for you and your family.
2. Secure that mortgage early
Many first-time buyers will go searching for a property before having a mortgage secured, thinking they need to know how much to borrow before applying. However having a mortgage agreed ‘in principle’ when making an offer can give it considerable weight. The amount you can borrow is based around your earnings and financial position, so if you aim high you can always opt to borrow less if you find a home well within budget.
3. Find the mortgage that suits you
How much can you really afford to borrow? Applying for a mortgage early will iron out exactly what level of property you can realistically purchase. But repayments will need to fit with your lifestyle, so think about the length (term) of the mortgage, whether you want a fixed-term repayment or interest only deal and whether an incentivised scheme may be of benefit. Initial consultations with mortgage brokers and advisers are usually free of charge and can be an enlightening experience. Many estate agents work with mortgage brokers to find the best deal for you, but there will be a fee associated with such a service if you choose to use it.
4. Know the type of property you are looking for
This may sound obvious, but what is your goal? Are you looking for a family home to settle into long-term or are you happy to initially forego a few creature comforts in order to create value in the property? Be very clear to any estate agent what you are looking for. A renovation project will certainly get you a below-average price, but are there enough funds left over to raise it up to standard or would you rather pay over-the-odds for a home that is ready to enjoy?
5. Do your homework
Think you have found the perfect property? Do some homework before placing an offer on the table. It is advisable to spend a few hours around property at different times of day to get a feel for the neighbourhood. Speak to some people in the area, then get down to further research. Does it fit with your essential criteria – are there strong transport links, is it in catchment for the right school?
6. Negotiate hard
We are talking about vast sums of money here, so do not be afraid to go in low with good reasons for doing so. Remember, with your mortgage secured your position is strong. If you need to raise your offer make sure you have a maximum in mind and do not exceed it, as it is easy to let your heart rule your head in these pressure situations.
7. Surveys are worth the money
Surveys can be an expensive part of the house buying process, with a detailed HomeBuyer’s Report costing up to $500 depending on property size and a full structural survey sometimes in excess of $1000. Unfortunately horror stories of buyers electing to cost-save at this part of the process are all too frequent. If there are any issues you need to be able to consider them carefully, potentially using them in your favour as a bargaining chip.
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