The first house you buy might not look like this one in the picture but it is still important to get your sums right before putting pen to paper. And not least because of the amount of money that is likely to be involved these days. The average house deposit for 1st time buyers is now around 50% higher than the average cost of a first time buyer’s house in 1983. At the beginning of the eighties a first time buyer could expect to pay £20,810 for the average house. That figure is now around £150,000 – an increase of over 550%, and a first time buyer today would need, on average, a deposit of over £30,000 to secure a loan to buy it.
To be fair it might be possible to find a 90% loan these days but you might end up paying an interest rate of close to 5% rather than the 2% or 3% that you would be offered if you had a bigger deposit.
On top of these pretty horrific numbers the report goes on to suggest that the average age of first time buyers is now 37 if they are buying independently and 29 if getting help from parents or other family members.
So it looks as though there are plenty of hurdles to jump through when trying to get your foot on the first rung of the ladder, if that’s not too much of a mixed metaphor.
So if you are looking to buy your first house what can you do to make the process easier?
Moneysucks offers you some tips:
Make sure you do your sums before starting to look at properties.
Calculate all of the costs involved in the purchase remembering to add in Mortgage Arrangement Fees and legal costs as well as the deposit. And remember that it might seem like a good idea to add any fees to the loan to save you money up front but if you do that you’ll end up paying interest on it for a couple of decades!
And when you’re doing your sums make sure you take into account increased costs when you own rather than rent. Your monthly expenses will increase and it’s easy to get lulled into a false sense of security if you think only of the cost of the loan.
Check out your credit rating
Although most lenders will base the money they lend you on your income, more and more are also taking account of any other loans or debts that are outstanding so clear as many as you can before looking for a mortgage. Also your credit history is important so make sure that you are up to date on all of your other commitments.
Share the cost?
More first time buyers are buying jointly – either getting into bed (metaphorically at least) with a partner, family member or friend to help spread the cost. Even the Government might help with some of the ‘shared equity’ schemes that are now available. If you do go down this route make sure you take some robust legal advice before you put pen to paper. There’s no point saving a couple of quid now only to end up losing it all in a lenghtly and frustrating legal battle if it all goes wrong and you fall out a few years down the line.
It’s a jungle out there are there are hundreds and hundreds of different mortgage options to choose from. It’s a good idea to do a bit of research for yourself online but there are lots of good quality independent mortgage brokers out there who will guide you through the process and make it as painless as possible. They will need to be paid so check whether their fees come from the mortgage company or from you.
It’s not about making money
The recent property boom has led many to believe that owning property is a licence to print money. It’s not. A house is a home and a place to live not an investment! Treat it as such. If you want to make money out of property buy another one and rent it out, but that is risky and you should take a long term view. If your only property is the one you live in treat it as a home rather than a money machine!