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First time buyers
Buying your first home can be a hard enough process at the best of times, but in today's rapidly growing market it is more difficult than ever. Property prices, especially in the cities, have soared beyond expectations leaving many first-time buyers looking for an alternative.
The interest rates have risen and have affected people who want to cross the threshold of the property market. The chances are that the interest rates will see further hike.
A few mortgage products are available, such as 110 per cent loan-to-value mortgages and five times annual salaries. They have a propensity to mean more risk for the buyer. Very few mortgage products have evolved to strike a balance between the dramatic incompatibly between house prices and wages.
The prospective buyers have to deal with cut throat competition which is a huge headache. Block analysis are not unusual, whereby perspective purchasers simply view the house as a group, and then race to be the first to put in an offer. If a member of this group is a professional developer or cash purchaser, then it is not unusual for the first-time buyer to be left behind.
Societal brunt
Property possession has conventionally provided a safe and sound place for retirement, at the same time has developed young buyers very well off individuals by the time they reach senior citizen status. This kind of social impact of the first time buyer will only create conscious first time buyers with a foresight.
This is the age where pensions can't take care of your residence requirement after requirement. If the security of not having fully paid for your own home by the time you reaches retirement can have a remarkable effect.
There is ample pre-saving which will have to take priority. The other aspect of life like children's education and health insurance will be neglected.
Some positive policies
The government has introduced a couple of strategies to help first-time buyers. The stamp duty threshold was recently raised by £5,000 to £125,000, and the introduction of Home Information Packs (HIPs) in June will help this group of buyers above all others - although perhaps not to the extent that was initially hoped. All local authority searches, and drainage and water searches, will be carried out by the vendor and service charges for leasehold properties will be completely transparent. In addition, an Energy Performance Certificate (EPC) will be included, therefore enabling buyers to see how expensive it will be to run their home.
Another government initiative is the Shared Ownership Scheme (see below), which is implemented by housing associations. Aimed at key workers, this is an innovative way for low-paid employees to get on the property ladder.
Despite these strategies, the onus on first-time buyers ultimately lies with the first-time buyers themselves. Getting on the housing ladder is a difficult process, but with a little innovation, research and effort, it is not an impossible one.
Steps to take towards making a purchase
If the destiny and obscurity can be over come without apprehension, there are still ranges of diverse ways which facilitate first-time buyers to get on to buying desired property.
1) Buying at auction-
Making a purchase at an auction is time and again proven a good way to secure a property at a realistic price. The ultimate bargains might have gotten over, but affordable property is definitely desired and prevalent at auctions. The complexity is that there are hard and fast rules to buying in this method, and they all engage strict organisation. Just once if you have had a bid accepted under the gavel it is lawfully obligatory and you will need to pay the ten per cent deposit that very moment, which means that you will need to have the survey done before the auction date. You then require resourceful solicitor which is definitely a must, as because the completion takes place just twenty eight days later.
2) Save money-
You need to invest in your future home carefully with a lot of planning. Start saving a few years before your decide to finally look for property. It's true that this is the only way to go in for the desired property. You need to cut down on monthly expenditures and keep aside some revenue towards property buying. This method is not as easy and possible. You might have to put in extra work, and avoid needless purchases
3) Change in location-
Try keeping the option open by looking in other parts of the country, or in a foreign land. That will prove much cheaper thanks to lower property prices and maybe even different buying processes. After you make a purchase than if you plan to rent it out, this strategy will enable you to pave the way for your home in near future to come. Even if you are working in a certain area does not mean you have to only restrict your search for property in that area itself.You could find better options available.
4) Co Purchase-
You can also decide in buying with a friend, a relative or even an unknown interested party can provide you both with the necessary funding required. Pooling resources will increase your deposit and trim down all of your monthly outgoings. Some precise mortgage products are now available for this buying method. Even a traditional mortgage would be appropriate provided that you register the property as Tenants in Common rather than Joint Tenants - meaning that your co buyer wouldn't automatically inherit your half of the property. If you do decide to take up this course make sure that you have a water-tight contract covering you both should one party decide to move on. You not only have to point out a Deed of Trust which will legally set up exactly who owns what fraction of the property.
5) Take a loan-
You can manage an offer five times your income by the lender, and some even offer tailored graduate and professional products. Progressively more, mortgages are available over longer terms, with some lenders offering loans of up to 40 years. Fact remains that you will be paying thousands of pounds extra in interest , but there is nothing stopping you re-mortgage to a shorter term after a couple of years. Of course if you are younger than you are more eligible you will be for such a long loan. If these are still out of your choice, think about extending yourself in the initial stage with the vision of taking a secured loan out on the property as soon as you have completed. You should keep in your notice, on the other hand, that this will take you in negative equity straight away and if the market crashes you may stay put for some considerable time.
6) Parental support-
A lot of parents understand the intricacy of getting onto the property dealings in the present day and could be more than willing to put forward a helping hand. There are several ways that they can aid your property purchase, starting from matching your savings to put towards a healthy deposit, to going sponsor on a mortgage. Put simply, this means that should you miss a monthly repayment they will be liable, however they must have at least 30 per cent equity in their own home in order to qualify. On the other hand they may wish to transfer some equity into your new home on the basis that you buy them out as soon as you are able.
7) Rent a room-
If you can manage the finances for the deposit you could rent a room but are bothered by the monthly repayments, you could consider getting a lodger.
The cost of a two-bedroom home is never significantly more than a one-bedroom property, and once settled you are entitled to earn up to £4,250 per annum on a tax free basis under the governments rent-a-room scheme.
8) Finding the middle ground
Your desire might be more than your requirement when you are planning to visualize your future in a posh three bed room flat with a rose garden. Maybe the best advice that any first-time buyer can get is to negotiate a middle path. Its better to rethink your wants and needs. While you may think you need more your actual requirement could be different .Making compromises will get you onto the property dealings more rapidly and not to forget that this is only your first home, not where you are deciding to spend the rest of your days in future. Your investment in foremost property purchase is just the beginning of your investments in property deals.
9) Modernize-
Purchasing a home that needs work can be very lucrative especially if you are a first time buyer. The cost of a kitchen or study is less than you might have estimated, for that reason giving you the chance to add value to the property. Do not let the competition from developers put you off. In order for a developer to make an earning they require to buy the property at a negotiated price due to all of the red tape involved. As a first time buyer you won't be selling your home immediately and so don't need to expect an instantaneous profit. That way, renovating on a smaller scale can give you the look you want at a price you can afford.
10) Buy off plan-
The trick to buying a home off-plan is timing. Generally speaking, buying off-plan secures you a property for the future at today's market value. While this makes good sense, there are further advantages to be made if you buy wisely. Developers rely on cash flow, and there are key times when this is more true than others namely as soon as the project is released and when it is nearing completion. Even if the asking price is fixed, you may be able to negotiate on fixtures and fittings, not to mention the deposit and stamp duty.
11) Save to buy property
A comparatively new concept in the UK, rent-to-buy enables you to rent a property with half of your monthly rent being put aside on your behalf for a deposit in a few years time. As with buying off-plan, the advantage of this is that you secure the property's price at today's market value, with the added bonus of not throwing money away on rent in the meantime.
12) Avoid stamp duty
The current stamp duty threshold stands at £125,000, meaning that any property you purchase for under this price is exempt. While this may be increasingly difficult in London, there is still the possibility to buy in a stamp duty exempt area, whereby stamp duty isn't payable unless the property is over £150,000.
13) Choosing your mortgage carefully
There is a wide range of mortgages currently on the market, however there is more to choosing a product than the monthly repayments. If saving your initial outlay is your prime concern, then you need to be looking for a mortgage that doesn't have any arrangement or administration fees - of which there are plenty out there. If you can't find one that suits your needs, ask if you can add theses fees onto the mortgage itself - you may even be able to add on conveyance fees. This will bump up your monthly repayments slightly, but will save you stumping up the cash in the beginning.
14) Bargain
As a first-time buyer you are in a great position, so ensure that you use this to your advantage. Finding that dream home is just as difficult for your vendors, and once they have found it they are unlikely to want to let it go. This means that they may be willing to accept a lower offer from a first-time buyer simply because you are not in a chain the risk of loosing their next property is perhaps not worth haggling over a couple of thousand pounds.
15) Shared ownership schemes
Housing associations and trusts occasionally operate shared ownership schemes which are designed to aid those who cannot afford to get on the property ladder. Generally aimed at key workers, such as teachers and NHS staff, these schemes involve buying a share of a property, and paying rent on the remainder of the balance. There is the option of buying more shares as and when you can afford to, as well as buying your home outright. However, be aware that when you come to sell the housing association has first refusal - albeit at market value.
16)Ex-local authority
Going in for buying an ex-local authority property has several rewards, possibly the most striking one being value. Current statistics state that formerly owned council homes can be up to 20 per cent cheaper than their period counterparts simply because of their lack of character. In addition, proportions are always generous especially when compared to today's new-builds. Finally, outdoor space is more often than not catered for, even if it is only in the form of a balcony.
In last few years have witnessed a significant increase in property prices and fast moving preferences making the first time buyers face hurdles in owning their property. They may be able to raise a mortgage, this will often fall far short of the cost of a property.It is definitely possible for the first time buyers to into the property ladder with an added advantage.
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