House prices and demand for housing is still on the rise in the UK. With the heavy competition and extreme prices, it can be incredibly challenging to buy your first home. But it’s definitely not impossible, and there are ways to make your climb onto the property ladder easier.
The pandemic has made first-time buying very tough. In 2021, only a fifth of first-time buyers’ mortgage applications were approved on their first attempt.
The figures before COVID were around 50%. So if you’re looking to buy your first house, you’ll need all the help you can get!
Although buying your first home will be tough, you can find a home that works for you.
Most first-time buyers don’t have lots of experience with house-hunting and negotiations. To help you climb the property ladder, we’ve compiled a list of the main problems with first-time buying and how to avoid these.
The biggest problem most first-time buyers face is not having a large enough deposit. This has become more of a problem because of the recent stamp duty holiday.
The demand for houses has increased so unfortunately, the price of houses has increased as well! The deposit of a house will be a percentage of the total house price. Higher house prices mean you will require an even larger deposit.
For a first-time buyer, usually, you will be looking at a 15% deposit. Depending on the price of the house you buy, you’ll be looking at around £10,000 to £50,000 for the deposit. So it’s time to start saving!
Mortgage requirements are also becoming stricter. If you’re trying to get on the property ladder, there’s a chance you’ll get rejected since you aren’t familiar with the process. So you’ll need to do a lot of research about what you need for the mortgage application.
With all these challenges, first-time buying is tricky, but many different options can increase your chances of having your first home.
Luckily for first-time buyers, the government is on your side! The government offers many different schemes that will make your buying process a little bit easier and even save you some money.
One of the most recent schemes is the government’s 2021 mortgage guarantee scheme. This allows buyers to get a mortgage for only a 5% deposit instead of the average 15% deposit that first-time buyers experience.
This is a significant difference and will reduce the amount you have to save for a deposit. So you can spend less time saving and more time searching for your new home. It could also allow you to buy a larger house because the deposit is smaller.
The deposit will be your biggest challenge, so if you don’t have to reach a vast sum, it will be much more straightforward for you to buy your first house.
It’s important to note that all schemes that you find will have limitations. For example, the 2021 mortgage scheme is only valid for houses less than £600,000. You must also have a good credit score and regular income and prove you can afford all the monthly repayments.
Try and do more research on schemes and use government websites. There are lots of schemes available that might help you out.
If you manage to get yourself a 95% mortgage, you will need 5% of the house price on hand to pay for the deposit.
If you start saving as soon as possible, you will have enough money for the deposit nearer in the future.
Set out a 3-5 year plan for your saving with targets for each month. Make sure you track your spending to see where you could save the extra pennies.
There are many different ways of buying your house that may be cheaper.
If you’re prepared to do some renovation, you can find houses in need of renovation that will be at a lower price. The renovation costs plus the house price are usually cheaper than buying a standard house.
Don’t be afraid to ask your parents for support. They will likely be happy to help you out. You may be able to bump up your savings a little.
Even if you’re not getting cash gifts or loans, staying with your parents while saving up for the deposit is a great idea. This will allow you to save a lot faster since you have fewer expenses such as rent.