Top tips to get on the property ladder
First-time buyers are continuing to struggle to save enough for a deposit on their first home, as incomes stagnate and the cost of living increases.
Those who manage to save up enough then have further hurdles to tackle – what mortgage should you choose? Who is offering the best rate? Where should you buy?
Industry experts offer their tips to get on the property ladder and what to consider before you make the big leap.
1. Shop around – Karen Barrett, Chief Executive at unbiased.co.uk
“We are seeing a number of head-turning deals on the market right now but scratch beneath the surface and you’ll soon see the sizeable deposit needed to access them.
“However, first time buyers shouldn’t be disillusioned because there are deals out there for people with smaller deposits and with the help of an independent financial adviser or whole of market mortgage adviser you can you get advice on all the products available to you from the whole of the market.
“They will help you to make the right decision according to your current personal and financial situation. To find a professional adviser simply go to www.unbiased.co.uk and enter your postcode.”
2. Make sure your credit file is up to scratch – Martin Eaton (Beacon Wealth Management)
“Ensure you have a good credit file. If you do not have credit you could apply for a credit card, use it for one transaction each month and pay it off each month to improve your credit rating.”
3. Keep your bank accounts in good order – Ray Boulger (John Charcol)
“Lenders normally want to see bank statements, usually the last three months, and so make sure they are in good order with no unpaid cheques/direct debits or bank charges for exceeding any overdraft limit or going overdrawn without an agreed facility.
Running the account with an overdraft is not necessarily a problem providing the overdraft is not steadily increasing, although it may reduce the maximum mortgage available – but exceeding your overdraft limit or charges for a bounced cheque, or direct debit, most definitely is!”
4. Parental Help – David Hollingworth (London & Country Mortgages)
“Parents are a key part of many first time buyers’ hopes of getting on the ladder. Whilst most will bolster their child’s deposit by gifting them a lump sum there are other options for those that cannot simply give cash to their child. Some deals will use parental cash or spare equity in their home as additional security, enabling the lender to advance as much as 95% or even 100% of the purchase price to the first time buyer.”
5. Consider a longer repayment – Simon Webster (Facts and Figures Financial Planner)
“These days most mortgages are 25 year repayments. Paying off early is everyone’s dream but 30 years is cheaper initially and you can always shorten the term later.
“Remember you will also need to budget for all move related fees; mortgage fees, house survey, legal fees, stamp duty, moving, decorating, furniture, curtains etc. and that’s in addition to every day household bills.”
6. To fix or not to fix? – Andrew Richards (Plutus Wealth Management LLP)
“Given that most economists are not predicting a rate rise in the Bank of England base rate for a number of years I would, depending on an individual’s plans, look at a short term two year product, knowing you will be able to remortgage in two years’ time still in a low rate environment; or play the long game and lock in a historically low five year fix rate now.”
7. Keep an eye on the interest you pay - Kusal Ariyawansa (Appleton Gerrard)
“My tip would be to pay close attention to the amount of interest you pay over the term. Realise its impact and develop a dislike of paying such large amounts in interest. This means figuring out how best to pay off the debt sooner rather than later.”
8. Ensure you insure – Danny Cox (Hargreaves Lansdown)
“Cement your financial security in your new home with the right insurances. You need to ensure there will be money to meet the mortgage repayments and other bills, should you become ill, unemployed or die. Your employer may offer some insurance for illness or death so check what you already have in place first.”
9. Hold your nerve it may save you some money – Ashley Clark (NeedAnAdviser.com)
“It is a buyer’s market out there and people looking to sell and move up from a starter home to the next level are desperate to sell to you. Use this to your advantage – as a first time buyer you are not in a chain and can complete a purchase quickly.
“Make an offer, lower than asking price but not too silly and ignore the selling estate agent, it is their job to sell the property for the best price. Court the vendor when you see the house, sell them the benefits of accepting your offer; no chain, no more advertising fees, no risk of them losing the house that they want to buy.”
10. Do not try and play the market – Minesh Patel (EA Financial Solutions)
“I would suggest first time buyers’ view buying their first home not as an investment but as a place they will enjoy living in, many first buyers try and time the market which rarely works.
“Choose the area they want to live and look for potential properties they can add value to over time though home improvements rather than attempting to predict when house prices will fall.”