Need-to-knows for first-time buyers

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Buying a home

Buying a house is a daunting prospect at the best of times - it’s likely to be the largest purchase you ever make in your life! Making sure you know what’s involved when buying a home and how much money you will need is important, so that you can make sure you are prepared and you can spend your time enjoying this next stage in your life. Here are our top tips for first-time buyers to help you work out if you’ve thought of everything and are ready to take the plunge.

Is now the right time?

Covid-19 has affected a number of sectors, and property is no different. Many are reconsidering where they live after spending so much time at home, and some have been able to cut down costs and save towards long term goals. Typically, during a recession, house prices drop, but it’s difficult to predict what’s going to happen next or when this could start to show in property sale prices. Experts seem to expect the property market to drop in 2020 and then begin to rise again in 2021.

Plus, with the latest government announcement on the ‘stamp duty holiday’ until 31st March 2021,if you’re considering buying, now could be a good opportunity as the threshold for paying stamp duty tax has gone from £125,000 up to £500,000, meaning the average stamp duty bill will fall by £4,500. Rishi Sunak predicts that nearly nine out of 10 people buying a main home this year will pay no stamp duty at all. Sound tempting? Before buying a home, it’s worth doing specific research into the areas you’d like to live in to see what house prices are like at the moment, as well as what houses in those areas sold for before Covid.

How do I get started? How much do I need?

Before you start your house hunt, you should have a deposit in place. You typically need to save at least 10% of the value of your home, but the more you can save the more options you will have open to you when it comes to a mortgage. If you can save 15%-20% of the value of the home you're looking to buy, you’ll find you have access to better mortgage rates. It's likely to take you longer to save up this much, but if you’re not in a rush to buy, doing so could save you a considerable amount of money in the long-term.

Before you start applying for a mortgage, review any outstanding debt you may have and make sure you are paying these at the lowest interest rates available, as this can affect your mortgage. You can check to see if Neyber can help you reduce your monthly payments by using our debt calculator. The last thing you want is to be overstretched and faced with an unexpected expense that puts you into difficulty, or have such little spare money that you can't do the things you enjoy – no house is worth that!

Mortgage lenders will look at your financial position, your affordability, and your ability to make the repayments should your circumstances change. The more prepared you are, the better.

Other one-off costs to consider

Mortgage arrangement and valuation fees – these vary based on the mortgage type and the provider but can be up to £2,000 but usually average around £1,000. In some cases, the cost can be added onto your mortgage. Stamp Duty (or Land and Buildings Transaction Tax in Scotland) – this is based on the value of the property. To find out more, you can use this Stamp Duty calculator.

Solicitor’s fees– these can range from £850 - £1,500. They will also carry out local searches on your behalf (to check if there are any plans that may affect your home), which will cost between £250 and £300.

Surveys - there are different types and can cost between £250 and £1,300 depending on the level of detail surveyed, starting at £400 on average.

Ongoing monthly costs

Then, there are also ongoing monthly costs. It's vital that you prepare a budget that isn’t just your mortgage repayments. How much does your lifestyle cost alongside your repayments? Additional costs that you might need to consider are:

Buildings and contents insurance – you need to protect yourself, you are a home-owner now and little accidents can and will happen, so make sure you take out appropriate protection. It can cost as little as £20/£30 per month and could save you heartache in the future, alongside the usual life insurance or income protection costs.

Necessary costs, like furnishing and decorating, or repairs.

That’s a lot! But don’t worry - we’ve broken it down into a handy step by step guide here.

Top tip: There are a number of government-backed schemes aimed at giving home-buyers and movers a helping hand onto the property ladder. If you are able to use one of these schemes, mortgage lenders will still need to make sure that you can afford to pay your mortgage, as we discussed earlier.

You can find more information about them here.

Wherever you are on your home-buying journey, understanding all the steps and the costs associated with it could help avoid additional financial stress. Already a home-owner? Make sure you don’t make these common renovation mistakes if you’re sprucing up!


Important: This is an option, not a recommendation. Your employer does not benefit from offering this service and all your communications will be with Salary Finance trading as Neyber. This content is for guidance and educational purposes only and is generic in nature. Salary Finance trading as Neyber does not offer regulated financial advice. Please seek independent financial advice.