Top tips for first time buyers
Before starting to look at properties, you need to start saving for a deposit. Generally, you need to try to save at least 5% to 20% of the cost of the home you would like, so if you want to buy a home costing £1500,000 you’ll need to save at least £7,500. Saving more than 5% will make it easier for you to apply for a winder range of cheaper mortgages.
But saving for a deposit is the toughest for first-time buyers. You must act quickly to take advantage of government help and seek out those high-interest savings accounts where your money will grow the fastest. Here are some tips to get you onto the property ladder:
There are a number of government-backed schemes aimed at giving home buyers – and movers too – a helping hand onto the property ladder.
If you are able to use one of these schemes, lenders will still ensure that you can afford to pay your mortgage.
Help to buy ISAs: are a must for all first-time buyers saving for a deposit. Not only will the government add 25% to your savings, up to a max of £3000, you can also receive up to 4% in ta-free interest while you save. Santander bank and Cumberland and Penrith building societies all offer Help to Buy ISAs.
First-time buyers still qualify, even when buying with someone who already owns property — parents, for example. And if multiple first-time buyers club together for a property, they can each have their own Help to Buy ISA.
However, as savings are capped at £200 a month, plus a maximum £1,000 initial deposit, it will take more than four years to reach £12,000 and unlock the maximum £3,000 of government help. So if you want to get a chunky deposit together before that, you will need to save elsewhere, too.
Regular savings accounts: thanks to the new personal savings allowance of £1,000 for basic rate tax payers, 95 per cent of people now pay no tax on their savings. So it’s a great time to use saving schemes that reward regular monthly deposits with annual interest rates of up to six per cent.
To access these accounts you typically need to hold or switch to the same bank’s current account. HSBC, First Direct, Santander, Nationwide and TSB all offer five per cent-plus on regular savings accounts.
The catch is, these offers rarely last more than 12 months, after which your money is usually funnelled into an account paying horribly low interest. Note the anniversary of your deal and be prepared to open a different one.
Finding a mortgage: There are many different mortgage deals to pick from, so choosing the right one for you can be tricky. It can depend on a number of factors, so it’s a good idea to do some research and talk to experts such as mortgage brokers.
Bank smart: when your goal is to buy a house, you don’t want to be wasting your cash on unwanted services offered by your bank for a monthly fee. On the other hand, perks such as money back on purchases, travel insurance or car club membership can be worth more than buying them separately, so choose with care.
Credit cards: make sure you can pay off your credit card each month to avoid hefty interest charges. If it’s too late for that and you’re already in debt, transfer it to a zero-interest deal, work out a plan to pay it off within the given time frame — and stick to it.
Shop smart: to be able to save that bit more each month, you need to make your money go further. Don’t dismiss the usefulness of loyalty cards. Shop with them regularly, take advantage of extra-points deals, and before long you’ll be able to do a shop for free.
Take a walk in the park — well, a run. Summer will soon be here, so why not ditch that gym subscription and design yourself a free outdoor training programme in your local park?
Budget for the other costs of buying a home: apart from your monthly mortgage repayments, there are other costs associated with buying a home. These include:
- Mortgage arrangement and valuation fees
- Stamp Duty (or Land and Buildings Transaction Tax in Scotland)
- Solicitor’s fee
- Survey cost
- Removal costs
- Initial furnishing and decorating costs
- Buildings insurance
Written by: The Team | On: May 23, 2016