Posted by The UK housing market is evolving. Netizens could witness profound changes in house prices and mortgage rates after the pandemic and inflation. It takes up to 3 months to finally land the keys to your priciest asset- your home. Thus, if you are excited about having your own home in the UK, don’t rush.
Explore the best mortgage rates, view several houses, and work with the best real estate agents and solicitors before moving in. This first-time home buyer guide involves everything from ensuring good savings to paying mortgage repayments timely. Here is how you can budget for the first property.
Step-By-Step Ways to Budget for the First Property
After acknowledging the process, buying a residential property in the UK might feel a bit winding. Doing so may give you a tab over the parameters you need to budget for. To go by the thumb rule, your mortgage must be at most 28% of the gross income each month.
However, if you have other debt payments in your credit profile, you would need to adjust the figure accordingly. It is all about balancing the liabilities according to affordability and budget.
If googling the simple home buying process for first-time buyers, you would benefit from the below-budgeting approach.
Understand the location
The first thing to decide is the location you prefer for your residential property. Narrow it down as per the specifics like-
- facilities
- transport convenience
- proximity to medical and general facilities, supermarkets, etc
- the future price of the property in the respective location
- Can you rent the property in the future?
Conduct site visits
The UK housing is suffering from a housing shortage. With sky-high mortgage rates, the country is not constructing any new houses per se. But it should encourage one to live up to their home-buying dreams. After conducting the location analysis, visit some houses on exhibition.
It is ideal to have a property expert beside you who would help you walk through the existing price of the property and future valuation. Consider viewing the house at the best time of the day. While viewing the property, ask below questions:
- How many individuals or interested buyers has the owner encountered?
- Why does he want to sell the home now?
- How long has the seller resided in the property?
- Is there something that you should know about the house? (important)
Save for a deposit
If you are eying buying a home, you must start saving for a deposit early. If you buy a home in around 5 years, calculate how much you would need to save every month.
The money you would save will be for a deposit. Please do not touch it unless there is no other option left to fund an emergency. Or better, you can check in no credit check loans under compromising credit and essential situations.
It would help counter the situation in time and safeguard the home-buying momentum. Parallelly, if you need more clarification about how much you would need to budget for the first property, you can use free mortgage calculators.
It provides a clear idea of when to reach the deposit goal with the existing saving cut. Many mortgage providers demand atleast 20% deposit price of the new home. If your home costs- £250,000, the deposit will be £50000.
How to budget for a home deposit?
Here is how you can budget for a home deposit:
- Leverage government benefits if you have a Lifetime ISA
- Get a side hustle
Freehold or leasehold- choose the one that suits you best
These are important parameters to consider while buying a house:
| BUYING A HOUSE ON FREEHOLD | BUYING A HOUSE ON LEASEHOLD |
| In this, the person owns the residential property and the land on which it exists. | In this, one holds the land on lease. He is not the owner of the land. |
| Most houses are freehold as it is the most preferred option | Shared ownership land is often sold under leasehold |
| One buys a standalone property and can use the property for whatsoever. | One example of leaseholds can be flats. A person cannot own all the flats at once. But he can choose one among many on rent |
| The ownership of the property always remains with the buyer | If you buy a property on lease, you must renew the lease agreement after the completion of the lease period. The maximum lease period is 99 years. |
| The freehold ownership calls for the sole responsibility for the maintenance and repair of the infrastructure. He shares all the freedom to do any repair or construction work. | In this, the owner of the property or the land is responsible for maintaining the property as per standards. The person may demand some fee from the leaseholder. |
| Due to significant house prices, the freehold properties are costly | Leasehold properties are relatively cheaper |
| Freehold property is ideal for persons wishing to invest for the long term with the freedom to design property as they wish. | It is ideal for households or individuals with a lower budget. |
It is ideal for households or individuals with a lower budget.
Choose the best way for your property investment purpose and budget accordingly.
Explore the associated fees
When you budget for the first property, factor in the associated fees; it is one of the essential considerations apart from the deposit. Thus, knowing the fee you may encounter in the process is a good idea. It would help avoid nasty surprises. Here are some costs to budget for:
- Conveyancing Fees- £500-£1500
- Land Registration fee-£90-£140
- Stamp Duty
- Homebuyer survey- £400-£1500
- mortgage fee-£1000-£2000
- Valuation fee
- Mortgage Broker fee (If you hire one for your situation or fetching the best mortgage deals)
- Indemnity Insurance
- Building Insurance
- Property Reservation agreement fee – £1000
Be mindful of these while budgeting for your first home. The rates may shift or change as per the property market and demand. Check for the updated rates before budgeting.
Get A Home Insurance
Before making your first step in your new home, get it insured. It would work in favour of both mortgage lenders and counter unforeseen property issues after securing the ownership. It would help you cover uncertain property maintenance or legal costs.
There are different types of property Home insurance covers to explore:
- Home Insurance
- Contents Insurance
- Home Buyers Protection Insurance
Bottom line
Once you follow the guide up to the end, the keys to your home are yours. These strategies would help you budget for the first property. Figure out the right approach as per your financials and property market.