Being a first-time buyer these days is no easy feat and not just because our schooling years were largely spent learning everything but how to adult properly. Hands up if you learned how to measure an array of triangles, know what 'Fe' stands for on the periodic table and can sing 'Happy Birthday' in French (because you never know when you're going to bump into a French person who is celebrating their birthday, obvs!) however have no idea of where to start when buying your first home?
Not only are most of us totally unprepared to take our first steps onto the property ladder but most of us don't even know the true costs of owning our own home either. Considering a mortgage is likely to be the biggest financial transaction and commitment that you will ever make, it's essential to know exactly what you're getting yourself into from the very beginning.
Here at Bradshaw Farnham & Lea, we have helped countless people onto the property ladder and want to help you do the same. We've put together this Ultimate First-Time Buyer Guide to help you take the first and best steps towards your first home.
1. The Saving Grace - Start Saving Today!
Anybody who has bought a house for the first time will tell you that the hardest part is saving for the deposit, it's the longest part bar paying off the actual mortgage itself with the average saving time of five years. Although they neglect to tell you this until you're well and truly into the process and are at the point of no return - thanks for the heads up!
The majority of first-time buyers really only start saving for this deposit when they start to think more seriously about owning their own home, with the average first-time homeowner age being 30, that means people will start to save specifically for their future home from around the age of 25. Chances are you're already there, so quick shortcuts to save are needed.
Spoiler Alert! Just because you have a 10% deposit doesn't necessarily mean you can get the mortgage! Learn more about this as we go through our guide.
We're not going to tell you what you should have done to save money but what you can do starting from now. Follow this and we can help you to save over two thousand pounds a year and that's without us getting started on
Three Simple Tips on Saving Money at Work
A. Stop the Lunches Out
Nipping out for food on your lunch hour may seem just a given part of your daily routine, a chance to get out of the office for a few minutes. Cue angelic music. Let's say you spend £5.00 on your lunch each day, that's £1,300 a year! Stop the angelic music. There is nothing heavenly about that and it's so avoidable. Does this mean you need to spare an extra few minutes each morning? Yes. But is it worth it? Hell yes.
B. Stop the Morning Coffee
Similarly to your lunches out, morning coffee is a must for so many who can't function without their daily dose of caffeine. We usually spend around £2.40 on a coffee when we have long days ahead but to have this treat every day of your working week would cost £624.00 a year. Now we're not saying to cut coffee trips out of your diary completely, but limit your intake and make do with homemade, just brush up on your barista skills!
C. The Parking Trap
Work in Liverpool city centre? Parking costs an absolute fortune, especially if you work in the business district. At best you can find parking here for around £6.00 a day if you want to park within a short walk from your office, but look a bit further afield to the car parks on Leeds Street and you'll find them for £3.00 a day. That's half the cost for an extra ten minutes walk! Just changing your car park could help save you £520 a year!
Just by following these three simple steps saving money at work, you can save an extra £2,444.00 a year to go towards a deposit for your home!
2. The Simple Question - How Much Can You Afford?
The question that nobody likes to ask themselves and yet the foundation for your future everything lies in the answer, your future home, your future finances and your future lifestyle! That's why we always suggest starting your search by meeting with a Mortgage Adviser, there is no better way to understand exactly how much you can borrow and how much you can afford. It's not always as straightforward as it seems.
Take the famous 10% deposit, for example, we tend to find our dream home and take 10% off the price, working towards saving this amount and believe that at the end of saving, we can go in and buy that dream house.
It's all well and good to have a 10% deposit ready but if the Mortgage Lender is not willing to lend the remainder of the house price, then you may have to lower your expectations of what you can afford, or, get saving even more to bridge the gap. Likewise, you may be able to lend a good amount at to top of your budget but are you willing to make sacrifices to your lifestyle? From where you do your food shop to where you take your annual holiday, that could all change depending on your decision.
Meeting with an Adviser helps you to understand exactly what you can spend and what you want to spend, as both are equally important. When considering your finances for the future, make sure you factor in a basic idea of:
Essential Costs of Being a Homeowner (Excl Mortgage Repayment)
Buildings & Contents Insurance
|Gas, Water & Electricity||Broadband & Telephone||TV Licence and TV Packages||Council Tax||Food Shop|
Essential Costs to You
Just because something is not 'essential' to living does not mean that it is not essential to your lifestyle, using this table will help you to understand what other things you need to consider when planning your finances.
|Car Insurance||Petrol||Parking||Bus/Train Pass|
|Lunches at Work||Eating Out||Socialising & Entertainment||Gym Membership|
Clothing & Personal Care
But where do you go to meet a Mortgage Adviser?
Some people tend to go straight to who they bank with, perhaps out of trust or efficiency, but this may not guarantee you the most suitable deal for your circumstances. After all, if you go with your bank then guess which Mortgage Lender they will recommend? Bingo! They will be only searching for mortgage deals from within and this may not be the best option for you.
We recommend meeting a Mortgage Adviser who is not tied to a particular mortgage lender, this way you get to see a more holistic view of what's on offer and discover what lender has the most suitable deal for you.
Your Mortgage Adviser will provide you with an Agreement in Principle, this lasts for 90 days and confirms in writing what the Lender is willing to lend. Not only does this put you in a good position to buy but it also looks great to Vendors.
3. Find a Home
Now you know have your deposit, you know what you can afford and borrow, you can start your property search in the best way possible - by filtering out the properties you can't afford. Out of sight, out of mind! Yes, filtering by 'highest price' is fun for a little while but when the search gets serious, it's best to stick within budget.
Remember that this is your first home and the market is especially tough for first-time buyers, don't have your heart set on a particular property, instead focus on what you need from a home, write a list of essential features. It may not have the white picket fence or breathtaking views, but does it have the amount of space you need? Is it a commutable distance away from work? Think of anything else that is not listed on your 'must-have' list as the icing on the cake.
Set up a few viewings of properties that match your criteria and make sure you're 100% on the decision, this is more than likely going to be the biggest financial transaction you will ever make.
Be aware that there will be other potential buyers interested in the exact property you are, which is why you need to be prepared as best you can be to act swiftly.
If your offer is accepted on a property, it's still not yours just yet and for good reason! When viewing a house, it can be impossible to find out if there are any serious issues with the property just based on looks and you certainly don't want to adopt the likes of subsidence along with your new abode!
In order to lend you that huge amount of money, Mortgage Lenders will organise a Survey on the property to ensure that there are no serious structural issues and that the property is secure enough to loan the money needed.
5. Home Insurance
When loaning from your Mortgage Lender what is probably the most expensive asset in your life, you need to be covered if the worst was to happen. Most Lenders make it an essential condition that Buildings Insurance is in place on the date of exchange of contracts, covering you from the moment that you are legally liable for the building.
Contents Insurance, however, is not essential. Why? Do you think your Mortgage Lender is going to be out of pocket if your freezer food defrosts due to a breakage?! Of course not, however, just because it isn't essential to a Lender does not mean that you should take this cover less seriously. You are the owner of everything in your home and damage to anything no matter how small will come out of your pocket. From jewellery to food and furnishings to appliances, they may not seem expensive in the grand scheme of things but think of the cost to replace everything if a flood damaged the lot!
You can opt for a combination of Buildings and Content Insurance to ensure comprehensive cover of your home and belongings. This is the best option to ensure complete peace of mind.