YOUR GUIDE TO Buying a property
I have this feeling now that actually no one is ever ready to do anything. There is almost no such thing as ready... Generally speaking, now is as good a time as any. Hugh Laurie Despite starring in the appropriately named TV show House, there s a pretty good chance that Hugh wasn t talking about buying one. Still, just when is the right time? Is it when you ve saved a bit more, or had the time to look into it properly? Maybe it s when prices calm down a bit, or perhaps when vnext spring rolls around new beginnings and all that. There are a hundred ways to put things off it s the old if not now, when? argument. But before you get too gung-ho about it, let s take a look at how to get ready. After all, unless you win the lottery, buying a house is the biggest purchase you ll ever make.
Deposits and all they entail Getting your finances in order This is where it all starts how big your deposit needs to be will vary depending on, among other things, where you re buying in the country, but according to Which? In 2015, more than half of all first-time buyers had to stump up more than 10% and the average deposit was 17% of the total value. There s no shortage of online mortgage calculators to help you work out what you could borrow based on how much you earn, how long you ll be paying it back and how much you can offer up front. But how do you build your deposit in the first place? Save hard, but save smart too You need to make sure your money is working for you and in 2017, current accounts simply won t cut it. This year you can save up to 20,000 in your tax-free ISAs that s almost 5,000 more than last year. The Lifetime ISA (LISA) is a new type of taxfree account that lets you shield 4,000 per year from tax as part of your ISA allowance. It s designed for two things, buying your first property or paying for retirement, but we ll concentrate on the first one. The important bit is that the government will pay in an extra 25%, so if you pay in the full 4,000 each year, you ll get another 1,000 on top. It s available for first-time buyers aged between 18 and 40, unlikea the older Help to Buy ISA, which has no age restriction. But it s valid for house purchases of a much higher value, up to 450,000. 17% Average deposit amount for a home
Wakey wakey! You could be eligible for a LISA Can you save for longer? If you re buying with your partner, you re both first-time buyers and you re both under 40, you can have a LISA each. That means if you can stand to wait a bit longer, you could put away 8,000 over the next 12 months and have the government make it up to 10,000 for you. That ten grand could make a big difference and could bring down your mortgage repayments they re calculated on LTV (loan-to-value ratio) and lower interest rates tend to accompany smaller LTVs. In English? A bigger deposit means you owe less, which could get you a lower interest rate on your mortgage.
Beyond the deposit, those pesky other expenses Be prepared for costs to mount up The deposit is the big expense, but it s not the only one. Painful as it may be, you need to be aware of everything that s likely to come up, so you can realistically make the call on whether you re ready. You ll need to pay for a valuation to make sure your potential new home is worth the price, and a survey to make sure it won t disappear down a hidden mineshaft. There ll also be solicitor fees, fees from the mortgage provider (though some may waive these), removal expenses and any final bills from your current home. Don t forget about stamp duty You also need to think about Stamp Duty Land Tax (SDLT) or just stamp duty for short. Until 2012, as a first-time buyer you could ignore it, but not any more. If your property is worth more than 125,000, which it will be, you ll need to find an extra 2% of the total value. If it s a penny more than 250,000, you ll pay 2% on the first 125,000 and 5% on the rest. According to www.gov.uk the average UK property price in January 2017 was 218,255, so the average is creeping closer to the 5% threshold. If you re in Scotland it s not called stamp duty, it s called Land and Buildings Transactions Tax (LBTT). It s the same principle, but there s a slightly more complicated sliding scale. You can find out more at www.stampdutycalculator.org.uk/ stamp duty-scotland.htm
It s time to put your feet up and get researching Mortgages compare and perks If you have a deposit together already, or you d just like to look at your options for the future, you can start researching the mortgage market. There are many types, but in general they fall into two main categories fixed rate and variable rate. With a fixed rate mortgage, the interest rate stays the same for an agreed period normally between two and five years. It means you ll know exactly what you re paying, but they can be more expensive and you ll need to watch out for the rate changing at the end of the agreed period. When you re researching, sometimes you ll find that mortgages offer perks and attractions it could be cashback, or something subtler like covering costs for legal fees. Keep an eye out for deals that could drive down those annoying extra expenses. But don t just rely on the online comparison tools. They re advertised on TV in various annoying ways and to be fair, actually very helpful. But you won t always find the best deals on a comparison site. As tedious as it is, do your research thoroughly and check out individual providers as well as comparison sites. Variable rate mortgages, unsurprisingly, vary. The interest rate can change at any time, so while they can sometimes be cheaper, you ll need to know you could cover any rising rates.
Getting the right mind-set Get your credit score sorted It can seem unfair that providers nose around in your financial history to decide whether you re trustworthy or not. But on the other hand, they don t know you, so what else do they have to go on, other than whether or not history says you re the sort of person who pays back loans? Your credit score can make or break your ability to borrow the money you need. The three main agencies, Experian, Equifax and Callcredit all allow you to get yours for free and knowing it is the first step to improving it. Before you even think about taking out a mortgage, you need to make sure your loans, credits cards and even things like mobile contracts are all ship shape. The same goes for your partner if they re applying with you, especially if you already share accounts. One person s bad credit history can affect the other if you re financially linked. CREDIT SCORES Do your peers have a better grasp of their credit than you? 54% 42% 40% 39% 40% 35% 18 24yrs 25 34yrs 35 44yrs 45 54yrs 55 64yrs 65+yrs HAVE LIMITED OR NO UNDERSTANDING OF CREDIT SCORES Source: The DNA of Financial Wellbeing 2017
Preparation is key - get online and make sure you re showing your best side! Prepare for the long haul Buying a property isn t quick. It takes time to save up and then the process itself can take months. According to citizensadvice.org.uk, a mortgage application can take three weeks or thereabouts. From having your offer on a house accepted to exchanging contracts can take up to seven weeks and from exchange to completion (when it s yours and you can move in) can take another four. However, all of those come with the sinking feeling inducing caveat that problems could make it all take much longer. Financially, be the best possible version of you Buying a house can be one of the most stressful things you ll ever do, though equally, it s one of the most exciting and rewarding. Hurrying yourself unnecessarily won t make the process go any quicker though. While house prices seem crazier by the day and the panic can set in, setting off prematurely, underfunded or with black marks on your credit history won t help. Get things right now and it could save you time, money and nasty surprises later. You need to make sure that financially, you re the best possible version of you.
Some helpful websites To learn more about the mechanics of buying your first home, have a look at citizensadvice.org.uk. If you re ready to start looking at mortgages, moneyadviceservice.org.uk has a good run-through of YOUR the different types GUIDE available. TO Buying a property For more on Stamp Duty Land Tax in England, Wales and Northern Ireland, visit gov.uk/stamp-duty-land-tax/ overview. If you re in Scotland, try stampdutycalculator. org.uk/stamp-duty-scotland.htm. If you re ready to see how your credit scores stack up, visit experian.co.uk, equifax.co.uk and callcredit.co.uk. Neyber First Floor (East) Tabernacle Court 16 28 Tabernacle Street London EC2A 4DD 0800 820 3103 020 3744 0552 @helloneyber company/neyber www.neyber.co.uk