Many will have heard the phrase getting onto the property ladder. As we age, we become more familiar with its intimate nature. First, we try to find our footing financially, then working up each successive rung until we maximise our potential or finally obtain the home of our dreams!
But what does it mean to start today – a newbie to the world of property? How do we maximise our potential share of the property market?
Step-by-step we talk you through the processes of buying a home in our report “How to get onto the property ladder.”
” To most people, the trick appears to be to set your goals early….”
– Content Strategies.co.uk
FACT: Obtaining a regular income source will eventually get you into a position of mortgage offers.
For those new to employment, you can temp with agencies. This will assist with a start-up employment record. Employment agencies litter every English city and town. Occasionally, by leveraging their reputations, the more prominent agency names may provide greater assistance with more reliable and better opportunities.
Then, later on, try and get more regular, reliable and better-paid employment.
The adage says, ‘It’s easy to get a job – when you’ve already got one!“
A smart move is to get a LinkedIn profile. Its thought that in 2020 alone, 87% of recruiters or talent scouts used LinkedIn. With over 20 million job openings, 122 million LinkedIn users received a job interview, and 35.5 million were hired by someone they met through the site.
Its commonly thought that more jobs are available on LinkedIn than any other source on the internet! Here you build up a profile as an alternative CV – so you’ll need one that will stick with you as you advance through any modern career.
Your level of debt will impact mortgage providers’ affordability assessments of your circumstances. Initially, you should probably aim for any of your unsecured debts to start to decrease. The only way to do this is through concerted budgeting. And you’ve got it – Setting goals is as important here as in any other part of the process.
TIP: When reducing your debts, start lowering the overall balances with lenders with the highest interest rates first, this increasing your disposable income faster.
To do this successfully, there are three areas for you to consider:
A Lifetime Individual Savings Account is a tax-free savings wrapper that provides a £1,000 bonus on top of £4,000 saved per annum (i.e. +25% top up) which can be held until the policyholder’s 50th birthday.
Note: Standard ISA or savings accounts offer above typical rates of interest consistently, when compared to regular current accounts.
Several conditions apply to your application:
Note: Remember to always refer to terms and conditions when effecting any financial product.
It is always good practice to seek sound, reputable financial advice.
At this stage, while not necessarily applying for your mortgage, it’s a good idea to assess what amount of deposit you will likely provide for in your chosen timeframe. A online search will give you a quick view of deposits that you’ll need for up to 95% of a property’s mortgage loan to value (LTV), but these loans are the highest interest rates available.
Other questions include what property value bracket you are looking to buy.
Note: When saving, remember that spending patterns impact affordability calculations from lenders.
The more you look like Mr Reliable, the better candidate you are to place for a larger mortgage with a lower relative interest rate.
So at this stage, people new to the mortgage market or with limited credit history may have many questions. Let’s run through a few of them:
I. What is a credit score?
A credit score or credit rating is a three- or four-digit number that lenders use to reflect how dependable you are at repaying money.
II. How does a credit score impact my mortgage application?
The higher your score, the lower a lender will perceive the risk of you missing any mortgage payments. This means your mortgage application is more likely to be accepted – often, the higher your score, the more preferential rates are offered to you in any mortgage application process.
III. Who provides an applicant’s credit score? And, who assesses any credit references?
The UK’s leading providers of credit scores are Experian and Equifax.
Both Experian and Equifax assess credit references as part of their ongoing activity to help you stay in control of your finances and protect your identity.
While it is free to access, any error can be time-consuming and potentially expensive to correct – so reporting them early rather than later makes sound sense.
IV. Where can I get advice on my Credit Score?
In any case of a concern, it is good practice to take professional, reputable advice. In addition to paid, professional advisory services, free advice is available in the UK from:
V. Why do I need a good credit score to get a mortgage?
Since 2014 all buyers have been subjected to regulations that make it a requirement to assess any proposed mortgage for affordability. When combined with credit ratings, this impacts the perceived reliability of the applicant’s ability to repay any loan.
While some applicants with poor credit ratings may find getting larger loans problematic, this can be rectified over months or years with little effort.
Five steps to repairing your credit rating over time:
Several strategies to improve a poor credit rating in relatively little time:
Now you’re positioned to have started saving or have saved a sufficient deposit. Also, you have corrected that needling credit rating to someone as reliable as Mr Reliable himself. Now its time to consider your options further; what home type, location, and purchase price will you choose? As always, you’ll need to be realistic about what you can afford.
While a preference for home construction type and location might spring out at you instantly – Unfortunately, for first-time buyers, it’s more than likely that you’ll be unable to buy your ideal home the first time out. More than likely, you’ll need to compromise either on home size, location, or both to find something that’s affordable.
Check house price trends to find out what price range homes have been sold for in the areas of your interest.
Top Tip: Check “First-time buyer affordability maps” by searching Google.
There are many, and these will assist you greatly in endeavours to find a home within your budget. Often they present both the value of housing and income brackets or “First-time buyer purchase affordability ratios“.
An example of 2017 governmental statistics to this end is represented here from https://www.ons.gov.uk/
Then set a savings goal for your deposit! Monitor prices of houses that come up in the areas you’ve picked out and match up your preferences while improving your credit score: being Mr Reliable, cutting costs, and saving to the last penny!
Next, we consider what government schemes are available to assist getting onto the first rung!
As defined by the Oxford English Dictionary, Stamp duty is “a duty levied on the legal recognition of certain documents.” Stamp duty is payable on paper documents that transfer the ownership of financial assets, such as shares and bearer instruments, (E.G. Mortgage Deeds) over a certain amount. Therefore, it is thought important to ensure that the documents are stamped by HMRC within the permitted period.
Stamp Duty Land Tax is paid by any buyer of property. There are different rates of tax that apply to different portions of the purchase. To view the Stamp Duty Land Tax currently in the budget, check out here or go to http://www.gov.uk/stamp-duty-land-tax/overview
The UK Government has several affordable home ownership schemes to assist people onto the property ladder. In consequence, you may be able to get financial help from the government to buy a home.
You could get:
You can no longer open a Help to Buy ISA. However, you can still open a Lifetime ISA to save for a first home.
Click the above links for further information from governmentally approved sources.
Seeking assistance from family and friends can make your situation more affordable and any credit application potentially more creditworthy. But, first, it’s worth remembering:
“It can be tempting to ask friends or relatives to lend you money. But you need to think carefully about whether you can afford to repay it and can cope with what might happen if you can’t.”
– https://www.moneyhelper.org.uk
There are several assistance methods through which a family member or close friend can improve your credit worthiness.
The first fact to consider is income and whether you’ll consider buying your home using family or friends as a second buyer. Initially, this might be beneficial as two incomes are better than one, impacting your creditworthiness and income calculations for affordability.
This process can be a little complicated. So before entering any legally binding arrangement, always seek sound, reputable financial advice from a professional who specialises in friends and family mortgages.
Alternatively, you could ask someone to be a guarantor. A guarantor is someone who agrees to pay your debts if, for whatever reason, you don’t pay—for example, a parent or close relative.
If you don’t pay what you owe, your guarantor is required to pay instead. If your guarantor doesn’t pay, this can result in them being taken to court.
A guide, “Being a Guarantor | Who Can Be One & What It Means“, can be found at Experian’s website here or directly at https://www.experian.co.uk/consumer/guides/being-a-guarantor.html
Are you a parent wanting to help your offspring onto the property ladder as a first-time mortgage applicant by contributing to their deposit or acting as a guarantor for their mortgage? If so, which.co.uk, the online consumer advice magazine, provide a series of online text and video guides to explain your options thoroughly. Click here or access them directly on https://www.which.co.uk/money/mortgages-and-property/mortgages/getting-a-mortgage/how-can-parents-help-first-time-buyers-arb7z0g6f19x.
Family assistance can be sought in many ways, and it’s good practice that should you seek to go down this route, you take good, independent, reputable financial advice from a suitably qualified member of a suitable organisation.
Congratulations, if you’ve got this far, you’re almost ready to consider who you’ll provide your new mortgage. It’s this to which we now turn our attention.
As part of the procedure, seeking professional mortgage advice will confirm your affordable savings, assess how much you can borrow and then assess the suitability of the mortgage term. We’ve covered the background here in the run-up, so enough said…
Tip: Having your paperwork ready to go is a really good idea here: Have your ID, Bills and proof of income sorted and filed on hand by your estate agent.
Look at different mortgage types and their suitability in your opinion and that of your specialist advisers.
Top-Tip: Starting small gets you a foot on the property ladder. By starting to build equity, you can gradually climb the ladder of property size and type. That’s what the Property Ladder refers to – the gradual increase in build size, quality, and worth over your lifetime to retirement when you may or may not choose to downsize to support your lifestyle.
For more information and frequently asked questions (FAQ) on Mortgages In Principle and how long they last, click here or directly access https://www.unbiased.co.uk/life/homes-property/what-is-a-mortgage-in-principle-and-how-long-does-it-last
Before making any offer, assessing if you’re paying over the nub for any home is common practice. To do this – as well as asking your experts, use a home prices tool to establish what amount is suitable. Numerous are available from a simple search of your preferred search engine. Be suitably patient, and if necessary, compromise. If it’s your first home, remember it will rarely be your dream home, but a good start!
Tip: Lock in your mortgage: – sign your contract! By signing your contract, you’re guaranteed for at least a period which is detailed at the point of signing any preferential or choice rates offered.
Now that your offer has been accepted, all the legal aspects need to be confirmed and double-checked. All the t’s crossed, and i’s dotted. It is worth realising that in England, the sale is not legal until contracts are exchanged. Which.co.uk have a handy explanation of the difference between contract exchange and completion. Click here to access it or directly access https://www.which.co.uk/money/mortgages-and-property/first-time-buyers/buying-a-home/exchange-and-completion-a6n6m8p8czvh
A survey is the property’s health check – in short, it will tell you if it is as good as it looks.
Prices vary depending on the valuation of the property and the type of survey commissioned.
A qualified property surveyor should be able to provide you with a list of services available and answer any questions you may have concerning this process. Before commissioning a survey, you should check that the surveyor is a member of one of the two main accrediting bodies:
FAQ: Is a survey an unnecessary expense?
Not commissioning a survey at all is rather like saying you are willing to gamble with large amounts of savings, debt, and your invested time “on the face” of things…
Appearances can often be deceptive. It is an enduring truth that it’s far better to be aware of any problems before you buy a property. Being informed is empowering. If anything impacts the surveyed property’s value (using the survey information), you can adjust your offer and re-negotiate the purchase price with the seller.
TIP: Following a survey, you can make an informed decision; you can agree with any seller about a price reduction – if you’re willing to budget for any repair work.
Alternatively, you could hold off on contract exchange till work has been completed to the required standard.
At this stage, your solicitor will research past and future impacts on potential property values. This will involve land registry and other searches – e.g., To assess the effects of any granted or proposed planning permission (and other risks) to the long-term value of your new home.
It is important to ensure that you have buildings insurance before contract exchange; otherwise, your mortgage contract may fail.
Want to compare the many building insurances on the market? A competitive quote can be obtained in minutes following a quick entry into your selected search engine to a price comparison website.
At this stage in the buying process, it’s worth noting that a solicitor can complete the exchange on the phone.
Contract exchange requires at least 10% of the purchase price to be transferred as a deposit. This must be completed before the exchange, which should be cleared with the bank in advance.
Now you have a legally binding house purchase! This means that your experience is now unlikely to fail.
It’s time to pack your stuff. But surely there are no complications to this part of the process? – Remember to use a reputable and reliable firm when it comes to moving day.
How much should moving home cost?
The present average removal costs range from £300-£6001, although you could rent a van to do it yourself.
Remember to shop for quotes (and references) to find a reliable firm.
Pro Tip: In a bind, you can always rely on the British Association of Removers, dedicated to
promoting professional excellence in the removals industry.
They can be contacted here or directly at https://bar.co.uk/
This is your final solicitor’s cost, breaking it into an itemised service. It requires a witness. It is sent to both buyer and seller. It is standard for the buyer to request the mortgage amount be transferred to the seller.
Congratulations! You’ve completed the long journey to proudly owning your home!
Remember these 18 helpful and handy, concise steps to assist you or your friends through the process next time it comes to buying a new property!
Note from the Author:
I noted that rarely has any time been quoted as suitable for each step. This is by design, as each experience is unique. We hope this article has presented you with a format with which you can understand the home buying process in the case of first-time buyers.
Thanks for reading, & good luck in future! – ContentStrategies.co.uk
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