Helpful Financial Tips for the First Time Buyer

Are you a First Time Buyer (FTB)?

 

Having 3 young adults in my family who have recently bought or are in the throws of buying their first property, I have compiled a basic check list in answer to some of the questions they’ve asked. If you live in Scotland or Ireland, the laws there are different than in England so some of the following may not apply to you.

 

The first question which should be asked is:

 

 “Can I get a mortgage and how much can I borrow? “

 

Speak to your bank (including the Bank of Mum & Dad these days) or building society initially and make sure you give them all the details they are asking for accurately. They will tell you about the different types of mortgages available to you, advise on the best one to suit your current circumstances and give you an idea of how much you can borrow. There are many websites where you can compare mortgage rates and it is a good idea to look at these as well. Ask how much the monthly repayments will be and work out a budget to make sure you can afford to make the repayments.

 

There are many sites on the internet where you can shop around for mortgages as well as sites which make comparisons, but make sure you are comparing all aspects of the lenders’ offers. Some will offer low interest rates fixed for a set period but make sure they do not double or even treble when that period is up and if they do, check that there is not a penalty payment if you change to a new mortgage lender after that period. Check the cost of arrangement fees as these may be higher on a fixed rate, fixed period, low interest rate mortgage which over a period of time, could counteract the benefits of the lower interest rate.

 

In your budget include all your monthly outgoings and estimate for service bills, insurances, council tax etc and don’t forget you will need to eat!  The Home Information Pack (HIP) may include some of the costs, but if not, your estate agent should be able to provide council tax costs and ask the current owners how much their bills are and of course ask your parents for advice as they will have many years of experience in paying bills! There are also websites where you may be able to find this information. If you are considering buying a flat, don’t forget there will be maintenance charges and ground rent. Always over estimate rather than under estimate as it is better to have money to spare at the end of the month rather than not enough to pay the bills.

 

 

 

 

“What should I look for in a property?”

 

When you’ve decided what you can afford, generally look at all properties in your price range. Decide what type of property will suit you and also look at the future with regards to re-sale. Don’t be tempted to buy a property which looks good value for money but has a bus stop outside the front door or a train line practically in your back garden, as potentially this may be difficult to sell when the time comes for you to do so. If the property is cheap or has been on the market for a long time, it generally means it is probably not as good a buy as it initially appeared to be. If you feel a property like this is all you can afford, it may be better to wait a while longer before making a purchase and save a larger deposit.

 

 

“What fees will I have to pay and how much will they be?“

 

The charges will vary and it is always advisable to shop around for a solicitor and surveyor for a good price. Where I have added an amount, this is an estimate and should only be used as a guideline.

 

Lenders Fees / their Surveyors Fees        Ask before you arrange your mortgage

Conveyancer’s Fees                               £500

Independent Surveyors Fees                  £750

Stamp Duty                                         This is a percentage of the purchase price (see box below)

Local authority search fees                    £95

Land registry cost                                £170 (Variable on Value)                                                            

 

 

 

“How can I cut costs? “

 

The original price is the “asking price” and you can make a lower offer even with a new build property. As a FTB, you are in a good position to make a quick sale providing you have arranged your mortgage in principle. Use this as a bargaining tool.

Don’t be tempted to cut corners and think the mortgage lenders survey is good enough, especially if you are considering buying and older property. An independent surveyor is only working for you and they will carry out a thorough survey which ultimately could save you a lot of money. If you are buying a new build property, look for an NHBC warranty. Most builders of new homes are registered with NHBC and this gives you extra peace of mind, but do look at what the warranty covers.

 

“I want to buy an old property but it needs some modernisation”

 

When you go for a second viewing, arrange for a tradesman to go along with you to give you an estimate for the work you would want to carryout and ensure these costs are included in your budget. Consider whether you would be happy to live in the property in the current condition for a while whilst you save to carryout the works, or if your circumstances are likely to change in the near future which would allow you carryout the work at that time.

 

 

“How long should it be after my offer is accepted until I can move in?“

 

This will depend on whether your purchase is part of an on going chain of buyers and sellers. Check the position with your estate agent as they will be in contact with the other agents throughout the chain.  With a new build, providing it is finished and ready to move into, you could hope to complete in 4 to 6 weeks.

 

“Are there any other ways of getting on the property ladder which will not cost as much initially”

 

Yes there are. You could consider a shared ownership scheme. This is where you take out a mortgage for a share of the property and pay rent on the remaining share. Your local housing association is a good place to start as they will have properties which they offer as part of this scheme. You will have to meet their criteria and add your name to a waiting list. You do not have to be married or have children to qualify but you will need a deposit and meet the criteria regarding income as you would with any mortgage application. When you come to sell the property, you will be entitled to your share of the profit which could potentially be enough for a decent deposit on a future property with 100% ownership.

 

 

 

I hope these questions and answers are helpful and “Good Luck“  with your first home purchase.  Do you have any extra tips to add?

 

 

 

This entry was posted on Tuesday, May 6th, 2008 at 5:44 pm and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.