Buying a house is on top of a lot of peoples to do list and aspiration in life. I know for me, up until the point I bought my first home, it was all I thought about and every last penny went into savings ready for my deposit. Having been through it all myself and a career in property, I thought I may be in a position to shed a few tips to anyone who is looking to buy in the future.
Deposit – how much do I need?
Most of us are in the position whereby we need a mortgage to buy and for that, we need to put down a deposit. You can buy with as little as a 5% deposit, meaning if the property you’re looking to buy is £120,000, you can buy it with as little as £6,000 deposit. As much as this is great to get you on the ladder, I would always advice you to save a higher deposit. It’s not easy, I know that but it is sometimes best to wait a few more years and put yourself in a better position. Adding extra years to your mortgage makes a big impact on the amount you eventually owe back so if possible, aim as close to 20% – 25% deposit as possible and keep your mortgage length as short as possible.
Leasehold or Freehold?
When I first got into property, these phrases didn’t mean much to me but it is really important that you know the difference. A freehold property means you own the whole building and a leasehold means you only owe it for a set amount of time. Leasehold is predominantly flats and apartments, whereby you purchase the lease and you still pay a ground rent to the property owner. The owner may be an individual but is most often a management company. You will pay an annual rent to cover things like communal areas, roofing, windows or sometimes utilities. I’ve seen ground rents be anything from £60 a month to over £500 a month depending on what the building offers. A lease is generally circa 99 years so you won’t necessary out live it but it does mean people will look at this when you come to resell.
The Local Area
It’s a given that you need to consider your local area when considering to buy a property but in the current climate, the thing I would advise to look out for mostly is new build sites. New build developments pop up all over the place these days so any green space nearby could soon be a small town. It won’t bother everyone but you will need to consider things such as drainage both waste and above ground. I’ve seen new build site be erected without a separate drainage system, it feeds in to the public drainage system which eventually were overcapacity and backed up causing a pretty nasty mess for those who had owned their homes for years!
Help To Buy
There’s a lot of schemes these days to assist younger generations getting on the property ladder. One that I highly advise considering is the Help To Buy ISA. I had mine with Halifax and it was seamless. Essentially, it is a separate savings account whereby you can save up to £200 per month and once you are ready to buy, the government give you 25% of what you have saved on top. There’s restrictions of course, but there’s no interest, nothing to pay back later on and it really is free money. If you have any questions further on this, I’m happy to answer or find the details here.
When buying a house, if only it were as simple as deposit and mortgage. Unfortunately, the process of buying involves a lot of paperwork and lawyers which means costs are involved. You will need to set money aside for paying your financial advisor, searches, conveyancing and stamp duty (if applicable). It sounds a lot, but the fees could add up to around £2000. I remember the costs kept rolling in but just remember it’s all worth it in the end!
I hope this is helpful to someone, if you ever have any further questions, please don’t hesitate to ask.