The dream of getting on the housing ladder is becoming a reality for more and more young people, as the government takes positive steps to help first-time buyers. It started with the Help-to-Buy scheme introduced to England in April 2013. Then Stamp Duty Relief was announced by Philip Hammond in November 2017 during the Autumn Budget.
Now banks and building societies are increasingly playing their part, with mortgages specifically tailored for first-time buyers. The trouble is that there are so many different mortgages available that it can be hard to track down the best deal. So here are eight simple tips to help those hoping to buy a property for the first time in 2018.
Shop around for mortgages before house-hunting
Make an appointment with your bank to discuss your mortgage eligibility. Then see if other lenders could make you a better offer. The comparison website www.moneysupermarket.com is a useful tool. Before you go house-hunting, get a clear idea on how much you will be able to borrow.
Try to find a flexible lender, rather than a box-ticker
Some lenders apply strict rules on lending, allowing you to borrow only a fixed multiple of your salary. Others are prepared to take a more flexible approach and, if you are self-employed, say, offer you a tailor-made loan.
Do you qualify for the government’s Help-to-Buy scheme?
The Help-to-Buy scheme is only applicable to new-build properties, but for first-time buyers saving for a deposit, the scheme can be a godsend. You only need to put down a deposit of 5 per cent of the value of the property. To find out more, visit www.helptobuy.gov.uk.
Maximise your deposit
The bigger the deposit – even if it means raiding the Bank of Mum and Dad – the better the mortgage terms you are likely to be offered.
Is a variable or fixed-rate mortgage right for you?
There is something to be said for both, and with interest rates predicted to rise in the medium term, many first-time buyers will be attracted to the idea of a fixed-rate mortgage, rather than be at the mercy of rising interest rates. But, beware of getting locked into long-term fixed-rate mortgages, which can be uneconomic in the long run.
Budget ahead for hidden extras
Even after the Stamp Duty Relief for first-time buyers announced in the Budget, there are other additional costs – from legal fees and loan arrangement charges, to furniture and fittings. These can take the unwary by surprise. Plan ahead, so there are no surprises later.
Improve your credit rating
If you have a bad credit rating – perhaps through getting behind with credit card payments – you are likely to be penalised by lenders. Make sure you pay off credit cards debts on time and live within your means to show your bank or building society that you can manage your finances.
Beware of over-extending yourself
The Bank of England is expected to increase interest rates twice during 2018, but these are predicted to be “modest increases”. So, although it can be sensible to take out a big mortgage at a time of low interest rates, it is important not to over extend yourself.
We do not see too many first-time buyers in Belgravia, for obvious reasons. Yet, in simple terms, the more first-time buyers who can be helped on to the property ladder, the better it will be for all home-owners. Housing markets can be stimulated by increased activity at the lower end of the market, as well as at the top end.
Getting on the housing ladder is a major hurdle for many young people. But those getting on the ladder have been slowly on the rise in the past twelve months – which is excellent news for the London property market as a whole. In November 2017, the number of first-time mortgages was up 15 per cent on the previous year – a clear indication that, for those prepared to shop around, there are plenty of good mortgage products out there to help.
- Henry & James is Belgravia and Chelsea’s premier estate agent for residential sales and lettings (www.henryandjames.co.uk).