Are you ready to buy your first home?

Whether it’s something you’ve wanted to do for years, or something you’ve just decided to do on a whim, buying your first home can be fun, exciting, scary, daunting, and thrilling all in equal measure. But how do you know when you’re ready to buy your first home?

This article explores some of the major considerations that you should probably…. consider…. before making the largest purchase of your life to date.

Hopefully you’ve given each aspect some thought, but it doesn’t hurt to make sure you’re comfortable with what you’re doing and why.

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Do you want a property?

Where do you want to live?

What kind of property is right for you?

Can you afford it?

Mortgage costs

Anything else you should consider?

Do you want a property?

A sensible place to start is at the beginning I’ve always found, so first let’s decide if you really want to buy a property for yourself. It’s often just an assumption that it’s something you SHOULD do, and our parents are always encouraging us to do it. But do YOU want to?

Pros

  • Security – you know where you live and are unlikely to get kicked out
  • No longer paying rent to a faceless landlord
  • You can make the place exactly how you want
  • You can add value to the property by doing work to it
  • It’s possible, but not guaranteed, it’ll go up in value while you own it
  • It’s grown up AF

Cons

  • It ties up a lot of your money
  • You are committing to staying in the same property and area (not forever, but more than if you’re renting)
  • Your home may be repossessed if you don’t keep up the repayments
  • You are responsible for everything that goes wrong with the property
  • It’s grown up AF

I’m not here to say which is right for you. All I want to highlight is that just because you’ve grown up being told it’s something you should do; doesn’t mean you have to.

For some people, generally younger and flightier people, the benefits of renting outweigh the downsides to it. But once you start laying down roots, and thinking of family and stuff like that – the security you get from owning your home becomes much more important.

There’s no right or wrong answer, but if you do want to buy your own place, the next big thing to consider is where is it going to be?

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 Where do you want to live?

Type of Location

Where you want to live and where you can afford to live may well be two different things. But fundamentally you are choosing from 3 different options;

  1. Countryside
  2. Town
  3. City

I think I’m more of a town person myself. Too many people in cities, but too little to do in the country. But, to each their own. Maybe you’re living in one of them now and love it, or maybe you long for something different.

This is going to be the first big decision you need to make. As a general rule, the more isolated you are the more expensive the property is going to be. Not always, but it’s not a bad guide.

Once you’ve settled on what type of place, you can start narrowing down the area for what’s right for you.

Remember that as a first-time buyer you’re unlikely to buy your ‘forever’ home first time round. So always keep a bit of an eye on resale potential. While you might be a lifetime support of Tranmere Rovers Football Club, you might struggle to find someone else who wants to live opposite the main entrance (I know nothing about football, that just happens to be the one from where I grew up).

 

Amenities

Think about the basic amenities that you’ll need. Do you want to be on mains gas supply and water, or do you want to have to remember to order an oil delivery and a septic tank person every so often? Is fibre broadband a deal breaker? Do you want to be able to order your Tesco home delivery, or is a 30-minute drive to the local shops fine with you?

If you have mini humans or are planning some, then schools become a consideration. Which catchment area are you going be in and what’s the local GP like?

Lastly the transport links for the property. Maybe you’re 200m from a tube station or maybe you’re 40 minutes from the nearest post box.

As I keep saying, there isn’t a right answer, just the one that makes the most sense for you.

 

Location Specifics

Finally think about the street / complex that you’ll be living in. What are the neighbours like, what are the roads like (i.e. adopted or unadopted – which just means do they suck and have holes in them everywhere), what are the buildings like, what is the view from the property like, what’s the parking like in the area, how dodgy is it at night (a good way to check on how much a council cares about an area is what are the state of the street lamps – random I know).

This is going to be a place you spend a considerable amount of time in, so it’s important that not only are you in the right type of location, with great amenities, but that you also like walking into your place every day and looking out of the windows.

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 What kind of property is right for you?

Houses

From a terrace (surrounded on both sides), semi-detached (one neighbour attached to you) to detached (alllll byyyyyy yourrrrrrrrrrselffffffffff), there are lots of variations of houses.

The main point to note is that you tend to buy these “Freehold”. This just means you not only own the building, but you also own the land it’s built on.

It does mean that you’re responsible for the building itself though as well. So if the roof falls off or the back of the house starts to sink into the ground, it’s your problem and your responsibility to get it fixed.

On the plus side, you can add a conservatory or build into the loft to add more space and possibly add value to the property in future.

 

Apartment

These are usually just single storey properties but can be over two floors – in which case it’s known as a maisonette. Unlike a house, you tend to only buy the property and not the building or the land on which it’s built.

You rent the ground that it’s built on – and pay ground rent. You also pay a service charge to the management company that looks after the building on behalf of the freeholder. So straight away you can see there are more costs involved with owning an apartment over a house.

On the plus side, you don’t have to insure the building because it’s someone else’s problem, and if the roof does blow off – while you might get a bit wet, it’s up to someone else to fix it. Which can actually be a curse and a blessing depending on how good the managing agents are.

Kind of goes without saying, but I’ll say it anyway, you tend to find more apartments in cities than in the country. With the odd smattering in towns. And apartments tend to be more popular with first-time buyers and younger single / couples.

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Can you afford it?

Your own home can be pretty damn expensive, you’ve probably figured that out by now. but I’ve broken down the main costs for you below.

 

Deposit

Anywhere from 5% – 100% if you want. This is the amount of money that you pay yourself for the property. With some developments you might be able to get a gifted deposit from the house builder (generally if it’s a new build), but most lenders won’t accept more than a 5% gifted deposit.

 

Stamp duty land tax

This is the Governments charge for buying a property. It’s usually just referred to as stamp duty.

You’ll be charged the following depending on the purchase price;

Property price Stamp Duty rate
Up to £125,000 0%
The next £125,000 (£125k – £250k) 2%
The next £675,000 (£250,001 – £925k) 5%
The next £575,000 (£925,001 – £1.5m) 10%
The remaining amount (over £1.5m) 12%

 

It used to jump up in steps, but nowadays it’s progressive. Which I’m sure is somehow advantageous to the Government, but best not to think about it too much.

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Mortgage costs

Whatever % you don’t put down as a deposit, you’ll be taking on as a mortgage. So, if you put 5% deposit down, then you’ll have a 95% mortgage.

Now this is where a Mortgage Advisor will come in handy (oh heeeeeeey), but they should be able to give you a ballpark figure for what kind of interest rate you’ll be paying depending on the type of mortgage you’re looking to take out.

Now let’s say you want to buy a £200,000 house and have 10% deposit. The advisor might let you know that you can expect to pay around 4% (just an example) for the mortgage.

You can pay your mortgage one of two ways.

 

Interest Only

This is where you just pay the interest on the loan you take out, and don’t pay down any of the money you borrowed in the first place. It’s a cheaper option but does mean at some point in the future you need to find the full amount to give the lender their money back.

 

Capital Repayment

A lot of residential mortgages are on a repayment basis. This means that not only do you pay the interest back each month, but you also pay the original sum borrowed back a little piece each month. It will take you a while (decades) but eventually you’ll have paid it all off and own the property outright.

In the above example of a £190,000 mortgage at 4% over 25 years you would be paying;

Interest Only                      =             £633.34 per month

Capital Repayment          =             £1,002.89 per month

 

Buying costs

The following are slightly more changeable costs that you may not have to pay, or if you do they could be varying amounts.

 

Mortgage arrangement fees

Mortgage companies like to get paid for arranging the mortgage for you. This can be added to the loan in some cases, but it can vary from £0 up to 2.5% of the loan amount. It’s important to be very good at maths, or use a Mortgage Advisor that is, as sometimes the lowest interest rate product might not actually be the best product for you!

 

Mortgage Advisor fees

You don’t need to use a Mortgage Advisor to be honest, you can go to any high street bank or building society and ask nicely for a large bag of cash. You won’t get any advice from the person you speak with, and they’ll only be able to talk to you about a small number of products, but you might be able to walk out with a mortgage.

Where a good Mortgage Advisor can be useful is if you want someone to look at every possible mortgage product out there and find the best one for you. This alone can save you the fee that might be charged by them.

For example, I charge a fee of £595 for my Mortgage Advice, but I can look at the whole market to find the most appropriate product for you and your circumstances. But you’ll also get – as the name might suggest – advice on what the best product is. So that will take into consideration interest rates and length of term for the mortgage, etc.

I also do most of the leg work on your behalf and generally guide you through the process and badger people who need badgering instead of it falling on your shoulders to do.

But it’s a personal decision which way you go with this cost.

 

Survey fees

Sometimes included with the mortgage arrangement fee. You will need a valuation survey and if it’s not included in the arrangement fee – you’ll still be paying for it even though it’s not really for you. The valuation survey is carried out on behalf of the lender so they can be safe in the knowledge they aren’t lending you 27 times the amount that the property is actually worth.

You can then upgrade to a HomeBuyers Report which gives you a traffic light system to let you know what parts of the property need additional attention paying to them.

Finally, you can opt for a full Building Survey which goes into much more detail of every structural aspect of the building.

Survey Type When to use it Cost
Valuation Survey Always, for everything £175 – £350
HomeBuyers Report If you’re concerned there may be some issues or want extra confidence the property is a safe bet £250 – £650
Full Building Survey For older properties or properties in considerable disrepair £500 – £1500

Solicitor fees

These are sometimes included in the Mortgage arrangement fee, but if not you can expect to pay in the region of £800 – £1000 including all of the searches that the conveyancing includes.

When you receive a bill from the solicitors and it’s a lot more than this, don’t freak out, check to see if they have included the stamp duty first before you do.

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Anything else you should consider?

So let’s do a quick run through of what we’ve just been over.

  • Do you really want to buy your own property?
  • If so, where do you want to live?
  • Once that’s decided what kind of place do you want to live in?
  • And can you afford the place you want?

If you answer No or Don’t know to any of these questions, it’s possibly time to go back a question and review once again.

You inevitably have to compromise with your first property. Actually with virtually any property you will usually compromise on something.

What’s important to is to figure out what are the non-negotiables when it comes to your requirements. And then what other stuff would just be nice to have.

The old saying ‘Location, location, location’ does hold true. The majority of the cost of a property in the UK is linked to the land it’s on. A 1 bed apartment in London wouldn’t be the same price as a Castle in Scotland otherwise.

But what makes an area appealing to a lot of others might not mean anything to you. So as always, make sure you are buying what you want for yourself.

It’s sensible to keep an eye on resale in the future. But you’re going to be spending more time in your home than you’ll spend anywhere else, so it’s not a bad idea to make sure you love it as much as you possibly can.

 

How can I help you?

As a Chartered Building Surveyor, Landlord, Homeowner, and Mortgage Broker there are probably a whole heap of ways I can help you. But mostly I want to make the financial side of things as straight forward as possible for you.

If you need someone to talk through your mortgage options with, I’d be happy to have a quick chat to see if I can help you achieve what you’re looking to do.

If not, I’ll point you in the right direction anyway (which might be back to the drawing board in some cases).

Get in touch here and get started with your first property purchase

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