‘Nobody knows for certain what the future holds. For most people, their home is a long-term commitment, and it is important to see things in perspective. Whether you decide to buy now, or to wait, there is a lot to consider,’ says Paula Amer, Conveyancing Manager in the residential property team with QualitySolicitors Parkinson Wright.
Here, she outlines some of the key considerations for first-time buyers.
Plan your finances well in advance
Building up savings can reduce the amount you need to borrow and a larger deposit can give you a wider choice of mortgage products, which could save you money overall. However, you must consider your personal circumstances, for example, any savings on rent, as well as the wider property market. The mortgage market is also constantly changing, and today’s mortgage deals may not be available in the future. This makes weighing up the pros and cons of whether to buy now or wait tricky. Research and following market trends can help, and you should take independent financial advice before committing yourself.
The Bank of Mum and Dad
Over a third of first-time buyers now receive financial assistance from their parents. For many, this works well. However, property ownership is a long-term commitment and over time circumstances can change. This type of assistance can also have tax implications, so it is important to be clear about the terms of any contribution. We can help you document the arrangement, which will reduce the risk of any misunderstandings in the future.
Obtain an agreement in principle
If you decide to buy, get an agreement in principle from your lender. This is confirmation, based on your income and basic credit checks, that you meet their criteria for a loan. Your lender is not legally bound to make the advance but is likely to do so subject to further checks. As well as giving you a clear idea of how much you can borrow, an agreement in principle can help when making an offer as it demonstrates you are in a position to proceed.
Budget carefully and stress test
Your lender will assess whether you can afford the loan, by looking at your expenses and income. This can sometimes feel a little invasive, but they want to ensure you can cover the repayments comfortably.
If you cannot pay your mortgage, your home is at risk. You should therefore be confident it will not overstretch your budget; ideally carrying out your own assessment first. Be honest with yourself and include all your purchase costs, for example, mortgage arrangement fees, stamp duty, and removal costs, regular outgoings as well as annual or one-off expenses, like holidays and household maintenance.
By using one of the available online mortgage calculators you can even assess the impact of any interest rate rises, and understanding your financial resilience can help you make an informed decision.
Speak to our conveyancers
There is a lot to take in when buying your first home, not least the jargon, so it is important to take your time and ask questions and our conveyancers will explain each part of the process to you.
You may find yourself encouraged to use a conveyancer recommended by an estate agent or the developer if you are buying a new build. However, you do not have to use them and it is important to choose a conveyancer who you are comfortable with, someone who will always put your interests first. Our solicitors will work hard to get you into your new home as quickly as possible, and we will also pay close attention to your individual needs and concerns.
Special help for first-time buyers
Schemes exist to help first-time buyers get on the property ladder. These change from time to time, so read the financial pages and keep up to date with developments. For example, the government’s First Home scheme lets first-time buyers, who meet the eligibility criteria, buy a new build home for 30 to 50 per cent of its market value. The discount, however, stays with the property when you sell, which means you may have to find that amount if you want to trade up. First-time buyers also currently benefit from relief on stamp duty, reducing their overall purchase costs.
Even if you do not plan to buy imminently, the Lifetime Individual Savings Account is a tax-efficient way of saving and the government will add a bonus. If you are under 60, you can only withdraw the money to buy your first home, but it is worth considering if you need to build up that all important deposit.
Think creatively
One option may be a shared ownership scheme, and these are usually run by a housing association. You buy a share in a property and pay a discounted rent on the portion the association retains. You then buy additional shares when you can afford to. This process is known as ‘staircasing’ and the share price is based on the then current market value of the property. In a rising market you will pay more. Conversely, in a falling market you will pay less. This can help to level out the impact of any fluctuations in property prices.
A flat or falling market may also offer more opportunities to buy a property through less conventional routes, for example, at auction or from a receiver or mortgagee in possession. These can be good options if you are prepared to take on a property with problems or one which requires additional work. This could let you buy a property you could not afford otherwise. However, these transactions often raise issues. For example, you may have to complete in a much shorter period, so it is important to have a conveyancer experienced in this type of purchase.
Make the most of your position
Many sellers prefer first-time buyers because they want to avoid the complications that can arise with a chain of dependant transactions. In an uncertain market, this can be even more attractive, especially if they need to sell. This could give you a stronger negotiating position. To benefit from this, you must show you are committed and can move quickly. Having finance in place, or an agreement in principle, and an experienced conveyancer on board will help. Any seller can then be confident everything will move ahead smoothly, making them more receptive to your offer.
How we can help
Ultimately, buying your first home is a very personal decision. It is also a big commitment, emotionally and financially. This can seem daunting, especially in these uncertain times.
If you decide to buy, our conveyancers are approachable, and you can be confident we will make the process much less stressful. We are well-equipped to take care of all the legal aspects of your purchase. We also understand how important it is to you personally and will always go the extra mile to support you on your journey to home ownership.
For further information, please contact Paula Amer or a member of the residential property team on 01905 721600 or via email worcester@parkinsonwright.co.uk
20% discount for First Time Buyers*
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.