Thinking about buying your first home? 5 things you should consider first

Thinking about buying your first home? 5 things you should consider first

by Jack Pickrell | 2 months ago

If you’re thinking about getting on the property ladder, you’re thinking about taking a huge step in your life. Congratulations!

Buying a home offers some excellent advantages. As opposed to renting a property, finally your monthly payments go towards owning the home you live in rather than just staying there. It can also be an excellent investment, since your property is likely to increase in value over the long term.

While you may think that purchasing your own home as soon as possible is the best idea, there may be some further considerations to make. Here’s five things we recommend thinking about before buying your first home. If you have a financial adviser, it may be worth bringing these up in a discussion with them.

1. How large will your initial deposit be?

The size of your deposit will depend on the value of the home you are hoping to purchase. It’s currently possible to get a mortgage with a deposit as low as 5%, therefore borrowing 95% of the home’s value from the lender. This could be a good option to take if you can’t save up a large sum of money for your deposit.

However, if it’s possible for you to save up a larger percentage of the value of the home, it will benefit you in a number of ways. Firstly, a larger initial payment will make your monthly payments lower. You will also have access to better mortgage deals with more chance of being accepted, since you’ll be viewed as lower risk.

In short, there are deposit options for those will little money saved, but you’ll be better off if you can save up as much as possible before purchasing your home. Speak to your adviser for help saving up for a deposit.

2. Make the most of government schemes

The government offers help to first time buyers afford a home in various ways.

  • Help to buy ISAs – For any first-time buyer within the UK, the government offers a 25% bonus to your savings. For example, when you add £200 per month to your ISA, the government will add £50. The government contributes up to a maximum of £3000, which could increase your savings from £12,000 up to £15,000 and increase your chances of being accepted for your home.
  • Shared Ownership Schemes – If you can’t afford the mortgage on the home you’d like, you have the opportunity of purchasing between 25%-75% of the home and paying rent on the rest. You can then purchase larger amounts as the funds become available to you. This could make it possible to own a home that is out of your initial budget.
  • Equity Loans – With an equity loan, you could offer a 5% deposit and still get a mortgage on 75% of the property value, thanks to a 20% government loan. You wouldn’t need to pay any fees for this loan for the first 5 years of owning the home. For example, for a £200,000 house, you could give a deposit of £10,000, request a loan for £40,000, and get a mortgage for the remaining £150,000.

For more information on any of these schemes, visit the government help to buy website, or for advice specific to your circumstances, get in touch with one of our mortgage advisers.

3. Additional costs to consider

Don’t fall into the trap of thinking that the deposit and mortgage payments are the only costs involved in buying your new home. There are a number of other fees that many don’t consider during their planning phase. Not everyone has to pay all of them, but most people will need to budget for at least some of these extra costs. Here’s a few of them:

  • Mortgage fees – At a time when the last thing you want to do is spend more money, you may have to pay a fixed fee for taking out a mortgage. These vary depending on the lender, but usually range from £500 - £2,000. There are ways to avoid paying this up-front, but they usually mean you end up paying more through interest or higher monthly fees.
  • Valuation costs – After your offer on the property is accepted, your mortgage lender will carry out a valuation to check the property is worth what you paid for it. You will normally have to cover the cost for this, ranging from about £200.
  • For greater peace of mind when buying a property, it is recommended that you carry out a property survey to highlight any defects with the home. Depending how confident you are with the condition you can opt for the simplest home condition report or go for the full building survey which tests things like the building structure.
  • Conveyancing – To handle all the legal aspects of buying a home, you’ll want to hire a professional property solicitor or licensed conveyancer. This fee depends on the conveyancer, the complexity of the purchase and the area you live but is usually between £500 - £1500.
  • Stamp Duty – First time buyers are exempt from stamp duty on houses up to £300,000 and get a discount over that value. If you’re moving house however, you’ll have to pay stamp duty on any property over £125,000.