It’s no secret that buying a property is one of the most stressful experiences you’ll ever face. This is even more true for first-time buyers, as the whole process is a steep learning curve.
If you’re a first-time buyer who’s looking to get on the property market, it helps to be as prepared as possible. Here are some useful tips for buying a property that are applicable to first-time buyers.
1. Know what deposit you need
The amount of deposit you need depends on many factors, including the price of the property, the mortgage company you’re using, and even your credit rating. Typically, a mortgage deposit would be up to 10% of the purchase price, but this jumped to 15% during the pandemic.
Most lenders have since dropped back down to 10%, but a higher deposit will give you more options.
Decide your budget around what you can gather together as a deposit, not the other way around.
2. Take advantage of the Help-to-Buy scheme
On the other hand, the UK government offers what’s known as a Help-to-Buy scheme, which comes in several different forms. These include:
- Help to Buy ISA. This is a savings account where you can keep your deposit, and the government boosts your savings by 25% annually up to a value of £3,000 a year. It’s worth bearing in mind that the Help-to-Buy ISA no longer accepts new applicants, although those with open accounts can still receive top-ups until November 2029.
- Shared Ownership. This allows you to buy a share of the property (such as 50%) and then pay rent on the remaining 50%. You can always purchase more in the future through a process called “staircasing” where you gradually purchase further shares until you reach 100% outright ownership.
- Mortgage Guarantee Scheme. Until 31st December 2022, the government is increasing the availability of 95% mortgage services. Providing the applicant’s credit rating is good enough, mortgage lenders can purchase a government guarantee that protects them against losses in the event of foreclosure.
- Equity Loan. Simply put, you pay a 5% deposit and the government loans you the remaining deposit, up to 20% of the total property cost. You can then obtain 75% loan from a normal mortgage lender to cover the rest, which then keeps your monthly mortgage payments manageable and you won’t be charged interest on the 20% loan for the first five years of owning your home.
The latest version of the Help-to-Buy Equity Loan scheme began on 1st April 2021 and will run for 2 years until 31st March 2023. It’s only applicable to new-build homes and the limit increases to 40% in London.
3. Buy a new build
New build properties are a good idea for first-time buyers for a number of reasons. Most importantly, the Help-to-Buy Equity Loan can only be used on new builds, making them a more attractive option.
Then there’s the obvious advantage of the property being new. It means you won’t need to do any renovation or repairs, and you can be confident everything is in good condition. The most you’ll have to do is decorate to your liking. Overall, this saves a lot of time and money.
4. Don’t forget to budget for other expenses
One thing most first-time buyers don’t consider is the extra costs associated with buying a home. Along with the deposit, you have legal fees, surveyor fees, estate agent’s fees (if not buying new), mortgage valuation fee, insurance, removal costs, ground rent and service charge (for leasehold properties) and maybe even Stamp Duty depending on the purchase price. Although these costs will be proportionate based on your mortgage and property, consider putting by an extra 10% of your deposit to cover everything.
When it comes to buying your first home, you can never be too prepared. Doing research pays dividends during the process, as you’re less likely to be caught off guard.
If you’re looking at new build properties, consider an Ocea permitted development property. Even though they are office to residential conversions, they are still classed as new builds, meaning you get all the relevant benefits, and you can rest assured they’re finished to the highest of standards.